Undue pressure on PSBs
In order to obey the government /RBI's Governor directions the SBI is smart enough to enforce the change in the repo rate on its lending rates. But at ...
In order to obey the government /RBI's Governor directions the SBI is smart enough to enforce the change in the repo rate on its lending rates. But at the same time linking the repo rate to the savings bank interest rates that too repo rate minus 2. 75 which amounts to the present SB rate of 3. 5% is highly unjustified.
It is also an embarrassing situation for the peers to follow suit. With wide network and huge business that too after the merger of associate banks the bank can offer any type of concessions to its customers, but before announcing it should have thought about other banks which have low business rates and suffering with continuous losses and in some banks with frauds still not coming to a conclusion may have to further their losses if they follow in the SBI footsteps.
While SBI with its dominant position and comfortable credit-deposit ratio, can probably afford to offer lower rates on its savings accounts without a dent to its CASA, the same cannot be said of its competitors who have lost deposit share to private banks at a furious pace the last five years. Hence SBI move may force its peers either to pay high floating rates on their savings accounts or refrain from floating them, both of which may held the competition stiffer.
Hence the RBI/government in order to help the corporate borrowers should not force the banks to implement every reduction of repo rate to show in their lending rates. If possible, all other banks may unite and follow the same guidelines framed among themselves leaving alone SBI to take its own decisions would certainly reduce competition among the banks baring SBI.
-TSN Rao, Bhimavaram