MUMBAI: Even as SBI’s deposit rates have peaked, CS Setty, chairman of the country’s largest bank, expects RBI to cut interest rates by a moderate 25 basis points only in Feb 2025. SBI aims to grow its deposits by differentiating itself on services available and offering premium services to those with a total relationship value of over Rs 30 to Rs 50 lakh.
“Our house view is that the first rate cut will probably happen only in Feb, which means until then, depositors would continue to have the rate of interest that we have currently, without any reduction. As far as retail loan customers are concerned, they may have to wait up to Feb,” Setty said, while addressing analysts after its results announcement on Friday. He added that interest rates on deposits have peaked.
Setty’s comments on the rate cut come a few days after RBI governor Shaktikanta Das warned of even higher inflation numbers for Oct that would surpass Sept’s 5.5%. While RBI has projected consumer price index inflation at 4.5% for FY25, last week, it cautioned of ‘significant upside risks to inflation’ from factors including geopolitical tensions, commodity prices, and unexpected rains during harvest. If RBI cuts rates in Feb, it will be its longest pause since it last hiked rates in Feb 2023.
SBI has analyzed its base of 50 crore customers, categorized them into promoters, stagnators and attritors and has drawn out a strategy for every segment. “One of the initiatives we have taken is differentiation in the wealth segment, targeting the lower end of this segment. We have also revamped the IT platform for wealth management and want to build this segment as a strong franchise,” Vinay Tonse, MD at SBI, said.
Setty said that a reduction in the repo rate would have a limited impact on the bank’s earnings as 42% of its loans are linked to the marginal cost of lending ratewhich reflects the cost of deposits and which is rising. “We have had two to three enhancements in the MCLR, and the rate cut, even if it happens, will be a relatively smaller rate cut,” he said. He added that these hikes will protect the bank’s margins by 20 basis points. It also protects its margins by offering unsecured retail loans on a fixed rate basis.
