SBI to reduce lending rates to exporters soon
"We will surely cut lending rates to exporters following the RBI enhancing export credit refinance limit to 50 percent in the policy review. However, the quantum of the reduction will be decided by our Alco (asset liability committee) meeting, which will be held next Saturday," SBI Chairman Pratip Chaudhuri told PTI over phone from Guwahati. When asked about the impact of the RBI move on liquidity, Chaudhuri said it will have some impact in future, but did not say how much.
The Reserve Bank on Monday, while leaving the key interest rates and cash reserve requirements of banks unchanged at its mid-quarter review, enhanced liquidity to exporters by increasing the refinancing limits of the outstanding rupee export credit for banks called export credit refinance (ECR) to 50 per cent from 15 per cent. The move, which the RBI claimed was a 0.50 per cent indirect Cash Reserve Ratio (CRR) cut, will release Rs 30,000 crore into the system, thereby increasing the overall liquidity conditions.
Banks on an average have been borrowing nearly Rs 1 lakh crore from the RBI daily due to tight money supply conditions. "With a view to enhancing the credit flow to the export sector, it has been decided to enhance the eligible limit of the ECR facility for banks (excluding RRBs) from 15 percent of outstanding export credit eligible for refinance to 50 per cent, effective fortnight beginning June 30. This will provide additional liquidity support to banks of over Rs 30,000 crore," RBI said in its mid-quarterly policy review.
The interest rate charged on the ECR facility is equivalent to the repo rate, which is currently 8 per cent. The move will provide some kind of leeway to banks to borrow up to Rs 30,000 crore. It may be recalled that SBI had last Friday announced up to 3.5 per cent cut in lending rates to top-rated corporates, SMEs and farm loan borrowers but not for individuals, effective June 1.
Announcing massive rate cuts, SBI Managing Director and Group Executive, national banking, A Krishna Kumar had said the bank would be reprising advances to the tune of 0.50-3.50 per cent but left the base rate unchanged at 10 per cent. Interest rates for borrowers under agriculture segment were brought down by 0.75-3.50 per cent in view of the need for credit flow to sustain the growth, he said. Direct and indirect farm borrowers with limits above Rs 25 lakh and up to Rs 100 crore would be offered finer rates to encourage credit flow to the priority sector.