The Reserve Bank of India maintaining an accommodative stance by relaxing key interest rates in the past few months and improved deposit growth outlook should see banks ease interest rates, a top official of State Bank of India said on Monday.

“Till last year, there was a very sharp liquidity squeeze. As a result, bond yields have not fallen. This year, the central bank has changed its stance, so bond yields are also falling.

“So, we have a little upside in the treasury. All of these will help bring down interest rates,” Arundhati Bhattacharya, Chairman, SBI, said after inaugurating the IFSC Banking Unit (IBU) of the bank at GIFT SEZ in Gandhinagar.

On NPAs (non-performing assets) in the banking sector, Bhattacharya expressed hope they will come down as demand in the economy goes up and capacity utilisation improves. “Today, capacity utilisation is still sub-optimal. Most of the units are running at 60-65 per cent capacity; when these come up to 80-85 per cent, we will definitely see NPAs coming down,” she said, adding that the Consumer Price Index (CPI) numbers have been at levels targeted by the RBI.

“If that continues, then I do expect that the interest rate regime will be accommodative. Banks will continue to pass that on, maybe not at a very fast gallop, but as demand goes up in the economy and credit growth comes back, there will be more competition and the rates will come down. So, it will be a falling rate regime that I am seeing,” she added.

Bhattacharya stated that deposit growth in the banking system has not been as robust as it should be, but the Seventh Pay Commission and a good monsoon are likely to lift deposit growth, creating thereby, a favourable case for banks to cut rates.

At the International Financial Services Centre (IFSC) in GIFT City, the bank opened its first IBU on Indian soil and the 199th international office, which will provide, among others, trade credit and foreign currency loans such as External Commercial Borrowings (ECBs) to Indian companies.

The bank is also looking to provide derivative transaction and factoring services at a later point in time.

Office, residential complex Earlier in the day, the chairman, along with Gujarat Chief Minister Vijay Rupani, laid the foundation stone for the bank’s Ahmedabad Local Head Office (LHO) to be set in at the domestic area of GIFT City.

Bhattacharya said that the new LHO will centralise all operations of the bank.

The 14-storey LHO of about two lakh square feet built-up area, will be developed at a cost of ₹100 crore.

The bank is also setting up two residential towers with 180 apartments for its employees and seven bungalows for the top management at GIFT City at an investment of ₹100 crore.

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