SBI may absorb savings account rate increase

Kolkata: Even if deposit cost goes up in case of deregulation in savings bank rate is implemented, country’s largest bank State Bank of India is unlikely to recover that from its borrowing customers, said A Krishna Kumar, managing director, SBI. It is also unlikely to increase the minimum balance for the savings accounts in the days of post-deregulation of savings bank rates, unlike some of the private sector and PSU banks which are keen to recover the higher costs of deposits from the borrowers. ICICI Bank has already said that it will add the cost to its lending rates in case it has to hike the deposit rates after the deregulation of the saving bank deposit rate is allowed by the Reserve Bank of India. Moreover, SBI will try to abstain from increasing transaction charges to offset the increase in cost. It will, on the other hand, stress more on other incomes to offset the impact. “The deregulation of the savings bank rate is still being discussed. After it is in place, we will look into the measures of how to offset the increased cost of borrowing,” said Krishna Kumar.  Talking to FE he said that SBI’s objective has been to encourage use of savings bank for the common man. “I do not really believe that we are going to take such drastic steps as we are encouraging use of savings bank for the common man. It does not make any sense to again put up a charge on the customers from that point of view,” he said. Commenting on the return on assets he said that the bank has to use funds more efficiently. In 2009-10, RoA of the bank had fallen to 0.88% from 1.04%. “May be in SBI we are not doing as best as we probably can. The way forward is increasing efficiency of our operation and put more emphasis on usage of alternative channels,” he said. Accepting that the bank’s margins will come under pressure while the rates go up, he said, “We are trying to prepare our rates in such a way that it does not affect our margins too badly.” The SBI, along with its associate banks, is looking at opening another 10,000 ATMs during the financial year. The banking behemoth, along with its associates, has around 25,000 ATMs across the country. It will also open 1,000 branches along with almost 500 in rural areas during this financial year.