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SBI to soon relook at the deposit rates: Arundhati Bhattacharya

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  3 Jan 2017 12:00 AM GMT

Mumbai, Jan 2: After starting the New Year with a gift of 0.9 percentage point cut in lending rates, State Bank of India (SBI) Chairperson Arundhati Bhattacharya on Monday said that the deposit rates also soon require a “relook” as a large amount of cash deposited in the banks, as a result of demonetisation, is likely to flow out. She said banks, indeed, have huge low-cost funds driven by deposits following the demonetisation drive and these will flow out. “But we expect 40 per cent of that to stay with the bank,” she added.

“At that time, we will have a relook at the deposit rates,” she told reporters at a press briefing here.

Bhattacharya said she saw normalcy return to the banking system by end-February or March, with uptake in credit growth. Her reference was to the events following the demonetisation of Rs 500 and Rs 1,000 currency notes, which put enormous pressure on commercial banks in servicing people for exchanging or depositing the old currency. Referring to the rate cut announced on Sunday, Bhattacharya said: “This is a liquidity-driven rate cut. The liquidity in the system in unprecedented, in terms of the fact that what we did in the first nine months of the year, we have done one and half times that in 30 days.” According to estimates, banks have collected cash deposits of over Rs 14.9 lakh crore following Prime Minister rendra Modi’s November 8 announcement. At the same time, this excess liquidity was marked by a lower credit growth. “But we want to give a very clear sigl that we are open for business. There is demand in the economy and there should not be any uncertainty on this.” “With unprecedented liquidity and low credit growth, we had space to cut rates,” she added. (IANS)

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