State Bank Of India

In a move to boost off-take of consumer and housing loans, State Bank of India (SBI), country’s largest public sector lender, has indicated that it could reduce lending rates in the next two-three weeks to boost credit growth.

SBI last reduced the base rate or the minimum lending rate in September this year. The base rate of SBI presently stands at 9.75 per cent. This move on materializing would come on the heels of RBI, leaving its key lending rates unchanged in its second quarter monetary policy review, which disappointed finance minister P Chidambaram who has been calling for cheaper loans to spur demand and help revive the economy.

However, the central bank slashed cash reserve ratio (CRR), the proportion of deposits banks have to park with RBI, by 25 basis points from 4.50 per cent to 4.25 per cent, a move which would inject Rs 17,500 crore of primary liquidity into the banking system to pre-empt potentially tightening of liquidity. Further, driven by huge inflow of deposits, SBI is currently having surplus liquidity of Rs 60-70,000 crore. Meanwhile, any move by SBI to lower lending rates is likely to be followed by other public sector banks.