SBI Chief explained why bank can’t go beyond threshold limit

SBI Chairman Rajnish Kumar on Saturday said its not possible for banks to go beyond the threshhold to cut interest rates on deposits as there are not enough social security schemes in India. Also it is impossible for them to lend to corporates at lower rates as it would be risky for banks.

Commenting on the rate transmission by banks, Kumar said whenever interest goes down, everybody starts talking and when it rises, nobody talks about it.

He said that when the repo rates went up five six years back, interest rates for borrowers did not increase in that proportion.

In 2013, the repo rate was around 10 per cent, the SBI Chairman said adding that since 2013, Reserve Bank’s repo and bank interest rates for consumers have been moving in a completely aligned manner.

“Secondly, we have repeatedly mentioned that banking system’s dependence …in India is largely on depositors. Today, 90 per cent of my deposit is retail deposit. If I want to lend money cheap, obviously I will have to pay less to depositors; and in a country like ours where there is huge population of senior citizens and in the absence of social security schemes, the interest on deposits is a source of earning,” Kumar said while speaking at the 92nd Ficci Annual Convention here on the theme ‘making financial system robust to aspire a USD 5 trillion economy’.

Currently banks are offering upto 3 to 4 per cent interest on deposits in savings accounts, and charge borrowers 8 per cent and above rate on loans.