Indian money lending giant State Bank Of India (SBI) earlier announced that it would cut its lending rates. But on April 23, Pratip Chaudhari, the chairman said that it may not cut the lending rates as costs of terms deposits continue to be high.
The private and the state owned banks are these days dealing with the problems like narrow profit margins, high-cost long term deposits, threat from rising volume of bad debts. These problems are a challenge in front of the banks to follow the Reserve Bank Of India with a cut in lending rates.
Even the banks had not passed the benefits of on a reduction on their reserve requirements as the tight cash conditions kept the despite rates high. The bank’s Cash Reserve Ratio (CRR) has been reduced by the Reserve Bank of India (RBI) in the month of January.
The CRR is the share of deposits the banks maintain with it. The reduction released 800 billion rupees in to the banking system. The RBI later also cut its policy rates by 50 basis point, so as to spur faster money policy transmission and to also give a stronger signal to banks.