Given that SBI has already reduced the base rate, another round of rate cut may be difficult but the bank may go for reducing rates and thereby cutting spreads in select loan categories

Mumbai: State Bank of India (SBI) has said though there is little room for further reduction in the base rate, it could cut lending rates in select categories, as it recently did for the small and medium enterprises (SMEs), home and auto loans, reports PTI.

Given that the bank has already reduced the base rate, another round of rate cut may be difficult but the bank may go for reducing rates and thereby cutting spreads in select loan categories, SBI Chairman Pratip Chaudhuri told reporters in Mumbai.

The bank had slashed its base rate by 0.25% to 9.75% last Tuesday in a bid to transmit the benefit of the 0.25% reduction in the cash reserve ratio by the Reserve Bank of India (RBI).

Chaudhuri said with the reduction in base rate, the bank was leading the path of interest rate reduction in the system, in sync with the wishes of the central bank.

The bank, which had also reduced its deposit rates in some specific tenors in the recent past due to subdued credit growth, currently has an excess liquidity of over Rs70,000 crore, including Rs50,000 crore in SLR bonds.

Chaudhuri also said despite muted credit growth, the bank is hopeful of meeting its credit growth target of 18-20% on the back of recent reduction in the base rate.

According to Chaudhuri, credit growth is up 14.5% as of now, while deposits are clipping at 16%. The bank also aims at 20-25% growth in auto and home loan in the current fiscal on the back of recent rate reduction in these segments.

Referring to net interest margin (NIM), he said that NIM for domestic business till 31st August was 3.94%.

Diwakar Gupta, chief financial officer and managing director of SBI said that the overall NIM target (domestic plus international) for first half of the year is 3.6% and pointed out that net interest income was better in August against July.

The bank also informed that asset quality in the second quarter was marginally better than the previous quarter.

Referring to the forthcoming restructuring of state electricity boards (SEBs), Chaudhuri said it will not have any significant impact on the bank as its total exposure to SEBs is only Rs400 crore.

The Cabinet is set to clear a Rs1.2 lakh crore loan recast of 25 SEBs which will also involve a tariff hike by the discoms, which are sitting on a Rs2 lakh crore debt.

The bank along with the associates would require Rs1-1.25 lakh crore in capital for Basel III implementation between 2015 and 2018, taking into account credit growth of 20%, Gupta said, adding the bank has many options including a qualified institutional placement to raise the required capital.

The bank also informed that there is no plan to merge any of the subsidiaries till tier-I capital of the parent bank increases as SBI would require capital of Rs2,000 crore for each merger.