SBI may review deposit rates by month-end

State Bank of India (SBI), the country's largest bank, may review interest rates on deposits by May-end.

"We will review interest rates at May-end. In general, there seems to be a trend of softening interest rates on the deposit side," said Chairman and Managing Director O P Bhatt on the sidelines of the inauguration of an inward remittance cell in Kolkata on Friday.

The bank has recorded a 30 per cent growth in credit and 39 per cent growth in deposits in 2008-09, said Bhatt.

The bank has projected a 25 per cent growth in credit and deposits for the current financial year, he added.

"Our deposit rates are based on the market condition, competition and fund supply. Our deposit market share has grown by 200 per cent in the past. We have been receiving $200 million every day as deposits. In April too, our term deposits grew very fast. We felt that there was an excess of supply over demand, thus we reduced our deposit rates."

When asked, if SBI was contemplating a rate cut on lendings, Bhatt said, "We are offering the cheapest interest rates in every segment. We are providing the cheapest home loan in the country at 8 per cent."

There has been an increase in non-performing assets and pressure on margins, he said.

Commenting on whether SBI would put a curb on sub-prime lending rate (PLR) loans as is the case of Punjab National Bank (PNB), he said, "PLR In India is a complex issue. I don't know if PNB will be able to abide by what it said. They have already said that sub-PLR loans will have to be referred to the chairman." Recently, the bank had reduced interest rates on domestic term deposits by 25 basis points across maturities, effective from May 4. At present, on 1,000-day deposits, it offers 8 per cent interest for deposits below Rs one crore.

Capital raising plan
 The bank may look into various options such as follow-on offer, preferential issue and rights issue, for its Rs 20,000-crore capital raising plan for the current financial year.

"We need capital for growth and there are many ways of raising it. Among various capital raising options such as rights issue, preferential issue, follow-on offer, our preferred option will be a rights issue," said Bhatt.

The bank would require about Rs 70,000 crore over the next five years for expansion, he said.

Inward remittance 
The bank has set a target of having a 50 per cent market share for inward remittance processing.

Out of the global $300-billion remittance business, India's share stands at $45 billion, according to Bhatt.

"There was a time when Mexico was the largest receiver of remittances. Last year, India overtook Mexico. Out of the total individual remittances coming to India, SBI's share is less than $10 billion. This percentage is still very small, and SBI should have at least 50 per cent share in remittances," said Bhatt.