SBI: If you are thinking about depositing money with the State Bank of India (SBI), you may find this update disappointing. SBI does not intend to increase deposit rates for the next two to three months. C.S. Shetty, the Chairman of SBI, mentioned that the ample liquidity in the banking system makes it improbable for deposit rates to go up in the next two to three months.

He also pointed out that the recent repo rate hike by the Reserve Bank of India (RBI) could be advantageous for banks’ net interest margins (NIMs) over the next two to three quarters. The RBI’s Monetary Policy Committee has decided to raise the repo rate by 0.25 percentage points to 5.50 percent.

Following the repo rate increase by the Reserve Bank of India, several major banks such as Punjab National Bank (PNB), Indian Bank, and Bank of Baroda have raised their lending rates by up to 0.25 percent, resulting in more expensive loans for customers.

Shetty noted that if the current high level of loan growth continues, some banks might need to raise deposit rates to secure funds for lending. He emphasized the importance of depositors receiving positive real interest rates amidst increasing inflation. Regarding the impact on net interest margin (NIM), Shetty stated, “The decision to increase rates over the next two to three quarters will positively affect NIM. The market anticipates a total rate hike of 0.75 percentage points in two or three phases. I believe this NIM benefit will be seen over a span of two to three quarters.”

Shetty highlighted that over half of the loans in the banking system are tied to external benchmark loan rates, which adjust in accordance with changes in the RBI’s repo rate. He expressed confidence in SBI’s ability to sustain a 14-15 percent growth in its loan portfolio. Shetty mentioned that the loan growth rate at SBI should be two to three percent higher than the current price gross domestic product (GDP) growth rate.

On the topic of a five-day workweek, Shetty, who is also the Chairman of the Indian Banks’ Association (IBA), stated that bank management is engaging with all involved parties through a committee established under the IBA to address the request for a five-day working week. It is important to note that bank employee unions had threatened a widespread strike in September over this issue.