SBI Chairman Rajnish Kumar on Saturday said banks cannot go beyond a threshold to bring down interest rates on deposits as India lacks social security schemes and likewise cannot lend at lower rates to corporates as the risk of default is too high.
On rate transmission by banks, he said when the interest rate moves down, ‘everybody starts talking and when it goes upwards nobody talks about it’.
When the repo rate was going up 5-6 years ago, interest rates for borrowers did not increase in that proportion, he said. In 2013, the repo rate was around 10%, the SBI Chairman said, adding that since 2013, Reserve Bank’s repo and bank interest rates for consumers have been moving in a completely aligned manner.
“Second... banking system’s dependence... in India, is largely on depositors. Today, 90% of my deposit is retail deposit. If I want to lend money cheap, obviously I will have to pay less to depositors; and in our country where there is a huge population of senior citizens and in the absence of social security schemes, interest on deposits is a source of earning,” he said, speaking at the 92nd FICCI Annual Convention.
