Deposit rate hikes unlikely for 3 months; RBI repo rate hike to help NIMs: SBI chairman

Noting the excess liquidity in the banking system State Bank of India SBI Chairman C S Setty on Thursday said deposit rate hikes are unlikely for at least the next couple of months according to news agency PTII believe that next twothree months there may not be any rate action on the deposits because we have sufficient liquidity in the system Setty saidCredit growthHowever he added that if the credit growth continues at the ongoing elevated levels some lenders may increase their deposit rates to fund the advancesSBI will be able to sustain its loan book expansion at a rate of 1415 per cent he saidWhile there is no ideal credit growth rate at least in SBI we believe that you have to be 23 per cent more than the nominal GDP If you are looking at a nominal GDP of 12 per cent 1415 per cent growth rate in credit is something that will sustain the momentum of the growth he saidWith rising inflation he said acknowledged that that depositors need to be compensated with some level of positive real interest rateRepo rate hike to boost NIMsThe chairman of the countrys largest lender said the RBIs repo rate hike should help banks improve their profit margins over the up to three quartersin the next 23 quarters it RBI rate hikes is positive on the NIMS People are expecting that the 75 bps will happen in 2 or 3 hikes But whatever happens I think this benefit on NIMs is available for 23 quarters he saidNet interest margin is a key financial metric to understand a banks profitabilityThe Reserve Bank of India RBI on Wednesday increase the repo rate by 25 basis points to 550 per cent its first rate hike since February 2023Setty noted that more than 50 per cent of bank loans are linked to external benchmarkbased lending rates which are repriced in response to the RBIs changes in the repo rateFCNR B related liquidity to get consumed within 23 quartersThe banking system has been flush with liquidity following the RBIs swap facility window that mobilised nearly USD 133 billion through FCNR B deposits and dismissed concerns that banks may become imprudent in their lending due to this deposit mobilisationHe added that the FCNRBrelated liquidity will get consumed in the next 23 quartersAnd in the interim when you have spike in the liquidity the RBI is also taking measures to absorb the liquidity I think this combination of absorption activity of RBI and the requirement of credit growth would enable us that there is no exuberance or imprudence on lending he addedPremature to talk on 5day bankingSetty who chairs the Indian Banks Association IBA said bank managements are engaged with all stakeholders on the issue fiveday banking through a committee formed under IBA and it is premature to comment on the subjectBank Unions had gone on a oneday strike on September 11 and had deferred their threeday strike commencing September 28 Their demands including fiveday working weekFinancial inclusionOn financial inclusion he said making banking simpler relevant personalised and more safe will be the key focus areas in the next phasePointing out that India is among the few countries where over 95 per cent of the population has a bank account he said it is also important to make these accounts more operational going forwardForeign investorsHe also urged foreign investors to look beyond the current size of the Indian economy and factor in the transformation path it is on while making their decisions according to PTIForeign investors have pulled out from both the equity and the debt market in the country in September and have continued to sell equities even in OctoberWith inputs from PTI