SBI expecting return to status quo in the near term

After a New Year gift of 0.9 per cent point cut in lending rates, State Bank of India (SBI) management is expecting return to status quo for the banking system by end-February or March, with an uptake in credit growth.

The demonetisation drive for curbing black money put enormous pressure on commercial banks in servicing people for exchanging or depositing old currency notes. Banks have huge low-cost funds on account of deposits following the demonetisation drive. SBI is expecting 40 per cent of those funds to stay with the bank. Going forward, the bank will be relooking at the deposit rates.

The rate cut announced on January 1 was a liquidity-driven rate cut. The necessary actions taken by the bank in the last 30 days were extraordinary which were not taken by the bank over the past nine months of the financial year. Meanwhile, excess liquidity was marked by a lower credit growth. SBI is keen to do business as there is demand in the economy and there should not be any uncertainty on the same.

The share price of SBI declined 2.46 per cent on the bourses to close at Rs 243.60.