An aggressive lending rate coupled with a high cost of deposits have seen the State Bank of India’s (SBI) retail business bleeding, probably for the first time ever, in the first quarter of this financial year.
India’s largest public sector lender had announced a slew of home loans and auto loans at 8 per cent per annum while other banks still charged around 10 per cent.
It had announced similar schemes for the SME sector to meet the needs of the SME units during the slowdown.
“Retail is a resource intensive business and our term deposits portfolio has also grown at a higher rate. We should see this easing over the next couple of quarters as the cost of deposits goes down and that would ease the pressure on the retail operations too,” said a senior official at SBI.
While on one hand the bank’s retail loan schemes have been received well, with the bank’s total retail lending growing 22.52 per cent year-on-year (y-o-y) to Rs. 1,12,862 crore, on the other hand, it has been saddled with a high cost of deposits as it was one of the few banks that had upped its rate of term deposits when slowdown was at its peak in the October 2008 to January 2009 period.
“We have seen a gradual easing in deposit rates as a result of which the cost of deposits are also coming down slowly,” the official said.
“As the term deposits made at the higher rate start maturing, the bank’s cost of deposits would come down significantly. In fact we see a 10-12 basis points easing in the next two to three quarters,” the official added.