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Informist, Friday, Nov. 8, 2024

NEW DELHI – State Bank of India does not expect any interest rate cuts from the Reserve Bank of India in the coming months to hurt its margins, the bank's senior management told analysts in a post-earnings conference on Friday. "If you are assuming that the first rate cut is likely to happen in February and not going to be a bulk rate cut, maybe a moderate rate cut of 25 basis points, so overall impact on margins is not going to be significant," Chairman C.S. Setty said.

Deputy Managing Director Saloni Narayan added that recent increases by the bank to its marginal cost of funds-based lending rates would also provide some protection from repo rate cuts by the Indian central bank. "So even if there is a rate cut, we already have that 20 bps cushion there. So net-net, we should be stable year-end," Narayan said.

Earlier on Friday, India's largest bank announced a net profit of INR 183.31 billion for Jul-Sept, beating analysts' estimates. Its net interest margin declined 8 bps sequentially to 3.27%.

According to Setty, while a reduction in the policy rate will impact all banks due to lending rates increasingly being linked to external benchmarks or the repo rate, SBI is more immune than most to interest rate changes by the central bank. "In our case... more than 40% of our book is MCLR linked. And even other benchmarked, T-bill linked loans are very short-term loans, which we have the capability to re-adjust the pricing there," Setty said.

"The only thing that would probably be a little sticky in terms of adjusting is the repo-linked loans, which are essentially the MSME (Micro, Small, and Medium Enterprises) loans and home loans. But 42% MCLR book with 2-3 rate hikes which we have had in the last few months would give us some protection in terms of the contraction of margin."

Speaking on the 10% year-on-year increase in SBI's current account deposits to INR 2.78 trillion as at the end of September, Setty said the bank had done everything that was possible to increase the same as it wanted to reduce its dependence on the current accounts of the government. "While the government contribution is still significant for us, we wanted to get back to businesses," he said, adding that the setting up of transaction banking hubs across the country and relationship management teams had been a big help.

Asked to comment on the Supreme Court's decision Thursday to order the liquidation of Jet Airways, Setty said it is too early to say anything and the order was still being studied. "The lenders have to meet and strategise how to go about it. We will wait for some time on this."

On monetising its stake in YES Bank, Setty said SBI had no plans on it as of now. "We will deliberate at an opportune time."

Shares of SBI closed 1.9% lower at INR 843.15 on the National Stock Exchange on Friday.  End

Reported by Siddharth Upasani

Edited by Saji George Titus

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