Will cut interest rates further once marginal cost of funds declines: SBI

SBI Chairman Rajnish Kumar on Thursday said the bank has already cut the interest rate and will reduce it further with decline in marginal cost of funding.  

The Reserve Bank had last week cut the repo rate by 0.25 per cent, but the country's largest lender State Bank of India (SBI) announced only a 0.05 per cent reduction in interest rate on home loans of up to Rs 30 lakh. 

"Whatever cushion we had, we have already reduced our rates. If our marginal cost of funding comes down, then that benefit we will pass on to borrowers," Kumar told reporters.

Earlier, speaking at a CREDAI conference here, Kumar made a case for developing the corporate bond market to help fund projects with long gestation period and reduce the burden on banks for funding infrastructure projects.

 

"In India, still banks play a prominent role... Bond market is sill not developed and since bond market is not developed the dependence on banks for the capital is huge. So we need to do more to develop bond market," Kumar said.

He said the dependence on banks for funding projects will continue for few more years till the time an alternative mechanism is developed, particularly for projects where the gestation period is long.

 

Financing long term projects puts new responsibility on the banks who have traditionally been working capital lenders, he said.  


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