State Bank of India (SBI) may not go aggressive and hike interest rates to mop up deposits as it still has excess Statutory Liquidity Ratio (SLR) to the extent about ₹4-lakh crore, which it can leverage to support credit growth in FY24.

In FY24, India’s largest bank expects its deposits and loan book to grow about 9 per cent and between 12 to 14 per cent, respectively.

Chairman Dinesh Kumar Khara likened his Bank’s FY23 loan book growth of 15.99 per cent (vis-a-vis banking system’s 15 per cent growth) to “elephant racing faster than the system.”

On the deposits front

When it comes to deposits, in FY23, SBI has seen an increase in deposit cost to the extent of about 16 basis points, much of it coming in the last quarter, Khara told analysts. One basis point is equal to one-hundredth of a percentage point.

“We have seen from the last quarter till now, an increase of about 9 basis points (in deposit cost). Whether to support this kind of credit growth, we’ll be required to go aggressive for further deposits, perhaps no,” he said.

The reason behind this is that the Bank still has excess SLR (comprising Government Securities and State Development Loans) to the extent of about ₹4 lakh crore.

Khara emphasised that the Bank can always unwind SLR and support loan book growth.

“We have increased the interest rate on deposits essentially because we always perceive that deposit is a franchise and to the extent possible, we will take care of the interests of the depositor provided our overall cost of resources don’t go up much. So, we have some elbow room, which is always available and we try to calibrate the deposit interest rate within that elbow room,” he said.

To an analyst’s question on the effect of the likely rate cut cycle on the Bank going forward, Khara noted that “When the rest of the market was increasing deposit interest rates, SBI did not increase the interest rates… We remained cool.”

When it comes to interest rates, the SBI Chief observed that even if it comes down, the Bank will not be required to reduce its deposit rate as it has not increased it to the hilt.

“We still have elbow room there. So, we will not be required to reduce our interest (deposit) rate. So, the picture which you are seeing today will probably stay,” Khara said.

Referring to SBI’s loan book growth of 15.99 per cent versus banking system’s growth of 15 per cent, he said, “People talk about elephant dancing. Elephant is racing, racing faster than the system, it is not only dancing. So, I think the kind of potential which we have you will have to watch.”

Green or black deposit

To a question on RBI’s ‘framework for acceptance of Green Deposits’, the SBI chief observed that whosoever puts money in green deposits expects better returns and wherever a Bank wants to lend from the proceeds of these deposits, concessions need to be given.

‘So, how to really strike out this balance? I think, it (framework) will probably stabilize over a period of time, irrespective of the colour of deposit, green or black. Whatever be the colour of the deposit, the opportunities will be supported,” he said.