CRR cut will allow banks to lower interest rates: SBI

Ahead of RBI’s mid-quarterly policy review, State Bank of India on Monday said a cut in cash reserve ratio (CRR) will give a room to banks for lowering interest rates.“More the RBI cuts CRR, greater will be the ability of banks to reduce rates,” SBI Chairman Pratip Chaudhuri told reporters here.

Cash Reserve Ratio (CRR) is the portion of deposits which banks are required to keep with the Reserve Bank. On March 9, the central bank had cut CRR by 0.75% to 4.75%. In January, too, RBI had reduced CRR by 0.50% to ease liquidity position in market.

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Mid-quarter review of monetary policy 2012-13 is scheduled for June 18. Chaudhuri said since RBI had slashed CRR, the SBI reduced interest rates on car and education loans and is making deep cuts in lending to SMEs.

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To another query, he said currently Tier-I capital adequacy ratio is at 9.67%. Hence SBI was not stressed for capital and profitability is expected to be good.

He said interest margins available at April end are very robust. SBI has already given a guidance that NIM, at 3.85% last year would be a minimum 3.75% in the first quarter.

On merger of State Bank of Mysore with SBI, he said the economic rationale for merger is as strong as ever, but merger requires capital. “It will therefore receive some attention as we have just finalised our annual results. We will see how to proceed during the current fiscal year,” he said.

He further said the bank is under stress, articularly in agriculture and SME areas. “Many of our SMEs are having difficulty realising payment of the supplies made, particularly relating to state government utilities,” he said.

He said the rainfall so far has been a bit inadequate in many parts of the country, but last year crop was good. “We have to see how the monsoon progresses this year,” he said.

On SBI’s assets quality concerns, he said it has seen significant improvement in asset quality. “Net NPA is down from 2.2% to 1.82%,which we think is a significant improvement,” he reasoned.

PTI