SBI Chairman Predicts RBI To Take A Moderate Rate Cut In February; Aims For Deposits Growth & More

Even as deposit rates at the State Bank of India (SBI) have likely peaked, SBI Chairman CS Setty anticipates a modest 25-basis-point cut in interest rates by the Reserve Bank of India (RBI) in February 2025. Speaking to analysts following SBI's recent results announcement, Setty explained that this first expected rate cut of 2025 would mean depositors can continue to benefit from the current rates until then, with no anticipated reductions in deposit interest rates. However, for retail loan customers, any decrease in borrowing rates may also be delayed until February.

SBI's focus now is on growing deposits through service differentiation. The bank is targeting customers with a total relationship value between Rs 30 lakh and Rs 50 lakh by providing premium services to these high-value segments. "Our view is that depositors will continue to benefit from the prevailing rates until the anticipated February rate cut," Setty noted, adding that SBI's deposit rates have reached their peak.

Setty's comments follow recent caution from RBI Governor Shaktikanta Das, who indicated that October's inflation figures could exceed September's 5.5% and warned of "significant upside risks" to inflation, citing factors such as geopolitical tensions, rising commodity prices, and unexpected rainfall during the harvest season. While the RBI projects a 4.5% consumer price index inflation rate for FY25, persistent inflationary pressures could keep rate cuts modest. If the February rate cut occurs as expected, it will mark the end of an extended pause since the RBI's last rate hike in February 2023.

To achieve steady growth in deposits, SBI has developed a nuanced strategy by analyzing its 50 crore customer base, segmenting them into "promoters," "stagnators," and "attritors." The bank is tailoring its approach to each category, with a particular focus on expanding its wealth management segment. Vinay Tonse, SBI's Managing Director, highlighted that the bank has revamped its IT platform for wealth management, aiming to build a strong franchise in this sector, especially by targeting customers in the lower tier of the wealth segment.

Setty pointed out that even if the RBI implements a rate cut, its impact on SBI's earnings will be limited due to the composition of its loan portfolio. Currently, 42% of SBI's loans are linked to the marginal cost of lending rate (MCLR), which is rising in response to the cost of deposits. "We've made two to three increases in the MCLR recently, so any potential rate cut will have a minimal impact on earnings," he explained, noting that the bank's recent adjustments have safeguarded its margins by 20 basis points.

In trading news, SBI shares were up nearly 1% at Rs 851.20 on the National Stock Exchange (NSE) as of 12:40 pm. The stock has delivered impressive returns of more than 46% over the past year and has risen nearly 33% year-to-date.

*Inputs from TOI*