We'll look at further lowering of loan rate if CRR is reduced: Pratip Chaudhuri

Interview with Chairman, SBI

Three days ahead of the Reserve Bank of India’s mid-quarter policy review, the country’s largest bank, State Bank of India, slashed loan rates today by 50 to 350 basis points (bps), effective June 1. Chairman Pratip Chaudhuri tells Abhijit Lele there are likely to be more cuts if the apex bank decides to reduce the cash reserve ratio (CRR) on Monday. Edited excerpts:

What was the thinking behind reducing lending rates across the board?
The bank is simply passing on the benefits it received from the 125-bps reduction in CRR by the Reserve Bank of India in April and May. In the current situation, in which there has been an economic slowdown and manufacturing growth has suffered, we wanted to provide some relief to customers. The benefit has been extended to both mid-size corporate and large entities.

In Reserve Bank of India’s mid-quarter review of annual policy, there are indications of another round of repo rate and CRR cuts. If that happens, will State Bank of India reduce rates further?
Any repo rate cut will have limited bearing on the lending rate decision, as it is more symbolic in nature.

However, if the central bank reduces CRR, we will look at further lowering of the loan rate. A one per cent cut in CRR will provide us Rs 800 crore of benefit. With lower rates, the bank can attract better quality assets.

What has been the growth in loan book in the first two months of the new financial year? Has the pressure on credit quality subsided?
Credit offtake in the first two months has been slow. But it is positive, unlike the contraction observed in the first quarter of every year. The worst period of addition on non-performing assets is also behind us. However, we have to be watchful and focus on recovery.