No more rate cuts in FY16, says SBI chief

MUMBAI: The State Bank of India is unlikely to bring down interest rates in the current fiscal, the bank's chairman Arundhati Bhattacharya said on Friday. The chief of the country's largest bank also said that the SBI was unlikely to come out with a Rs 15,000-crore equity issue of shares this fiscal, for which it had sought shareholders' approval in 2015.

The SBI has cut its benchmark lending rate - the base rate - by 80 basis points to 9.3% in FY16 (100 bps = 1 percentage point). "I don't think there could be any further lending rate cuts in the third quarter. But once we are in the New Year, we will be reviewing it," said Bhattacharya. The new lending benchmark prescribed by the Reserve Bank - the marginal cost of funds rate - is set to kick in from FY17. While this will bring down lending rates, it would be only for new borrowers and old customers would have to wait for the reset date, which could be once in 12 months. According to Bhattacharya, with inflation expected to be in the region of 5.25% further rate cuts are unlikely.

Last February, the SBI had received shareholders' approval for raising Rs 15,000 crore but given the weak market conditions, the bank would not raise funds this fiscal. "At this point of time, I don't think the issue will happen this year. We have taken permission to raise funds in the next one year and one year is not over yet," said Bhattacharya.

The SBI chief was speaking at the inauguration of its sbiINTOUCH - a hi-tech self-service branch. Instead of tellers, most of the functions such as cheque deposits, cash deposits, passbook updation and account opening are done by self-service machines. According to Bhattacharya, with the emergence of self-service branches, many high street branches might have to undergo an evolution.

The bank had aimed to open 250 INTOUCH branches and 1,000 other branches this fiscal. The target is now pushed back to calendar 2016 with 100 INTOUCH and 500 branches expected to open this fiscal.

"Branches will look different as more and more people are able to do things on the digital platform. What they need branches for is advisory, more in the nature of hand-holding for investments, loans and savings. So you will see much more advisory coming in, unlike today when branches are transaction-heavy and you do not get people to talk to you," she said.

While growth in high street branches are likely to slow down, Bhattacharya said that numbers would not shrink. "You might see branches shift from place to place, but given the demographic profile, I think branches will continue to remain relevant for 10-15 years in India, she said.