SBI Chairman Rajnish Kumar

As the head of the country’s largest bank, SBI chairman Rajnish Kumar has a pulse on what borrowers and depositors want. At a time when the economy is in slow-down mode, banks are being blamed for slow transmission of repo rates. But are banks to be really blamed? Cumulatively, the RBI has cut repo rates by 110 basis points this year, but top banks have not transmitted the whole benefit by way of Marginal Cost of Funds based Lending Rate (MCLR) reduction. In an interaction with media, Kumar explains what is holding back the bank from cutting MCLR to the full extent, shares his views on digital banking, and subdued loan demand. Kumar, who has spent over 38 years with SBI, was in Kolkata on August 18, 2019 as part of the state-level leg of the consultation process with officers to seek suggestions for achieving a $5-trillion economy in five years. Here are edited excerpts of Kumar’s interaction with media, including with RupeeIQ’s Kumar Shankar Roy, at State Bank Institute of Leadership.

Cumulatively, 110 bps repo rate cut has been done by the RBI. How much has SBI passed on to customers? How long will it take for you to pass the entire benefit?

We have 3 rates: MCLR (Marginal Cost of Funds based Lending Rate), RRLR (Repo Linked Lending Rate) and fixed rates.

RRLR was introduced on 1st of May and that is for all the working-capital loans like cash credit, overdraft, etc. Plus, on 1st July we introduced the RRLR for the home loans. Starting from 8.5%, we have brought it to 7.65% so it is an 85 bps transmission and that is precisely the rate cuts (quantum) done through the RBI. Through RRLR, we are now transmitting for all the home loan buyers who are opting for the floating rate which is the RRLR.

As for MCLR, we have cut it down from 8.55% to 8.25%.

The MCLR rate cut by SBI is then 30 bps. When do you plan to transmit the balance 80 bps of the 110 bps repo rate cut by RBI?

MCLR we can’t do…I can do it but then that means our depositors will be impacted. As a bank, we have to strike a balance between what we pay to our depositors and what we charge on loans.

Is there loan demand in the economy?

Credit/loan demand, as of now, is subdued. There is no supply-side constraint as of now. All the banks are more or less adequately capitalised. Interest rates moderated quite a bit. The system is sitting on surplus liquidity. The monsoon impact is likely to be positive, despite difficulties in some areas. The festival season is coming. The second half of the year is always a busy season. Hopefully, there will be increased spending from the government also. The festival season should give rise to consumer demand.

Additional Read: Top Banks Like SBI, HDFC Bank Lower FD Rates; What Options Do You Have?

Ahead of the festive season, can we expect new offers on home loans, car loans, etc. from SBI?

Car loans I have already reduced. If you apply for a car loan on digital channel i.e.YONO (integrated digital banking platform), you can get 25 bps benefit as a customer. This is a big benefit in terms of EMI.

There has been a focus on digital transactions but digital comes at a cost. What is your take?

There are many suggestions. We are discussing these issues. How do you increase cashless transactions without causing inconvenience..that is the question. We are also discussing how do we make digital transactions very cheap and this is possible; second is how do we make digital transactions very convenient; third is how we make them a habit; fourth is people want to be sure that digital transactions are safe.

Today, SBI does not charge anything for NEFT, RTGS, or IMPS.

The RBI has a committee which is studying the charges that are levied at the ATMs and other banks ATMs. We will have to wait for that committee’s report to be finalized.

Additional Read: From August 1, SBI Account Holders Can Do IMPS Transactions For Free

NBFCs are a key sector. What is SBI’s exposure to NBFCs?

It is a huge exposure, almost Rs 2.50 lakh crore. There are all sorts of NBFCs in that because even a Power Finance Corporation, or REC, or IRFC are clubbed together.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at [email protected].

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