SBI has room to cut rates by 0.25%: Bhatt

Sufficient liquidity in the banking system and low inflation have provided headroom for State Bank of India (SBI) to cut its interest rates by 0.25 per cent, bank Chairman O P Bhatt said.

"One important thing is that inflation continues to be below one per cent. There is room (for SBI) to cut rates by 0.25 per cent on both sides (lending and deposit)," Bhatt told reporters here.

"While improving fiscal and economic conditions are likely to lead to further reduction in interest rates in the coming months, time and quantum of rate of reductions can vary from bank to bank," he said.

Bhatt said the recovery in economic activities is yet to reflect on banks' asset growth and it may take some more time for that.

"There seems to be room for softening of interest rates. But when and how much it should happen, that we need to see," he said.

On dilution of government holding in state-owned banks, Bhatt said the government has been looking at various options to provide adequate capital to PSBs.