Deposit rate hikes unlikely for 3 months; RBI action to help NIMs: SBI chairman C S Setty

Mumbai: State Bank of India Chairman C S Setty on Thursday said he does not see deposit rate hike for up to three months because of the excess liquidity in the system.Speaking a day after the RBI's policy announcement, Setty said the shift to tightening of rates by the central bank will help banks expand their net interest margins (NIMs) for up to three quarters. I believe that next two-three months, there may not be any rate action on the deposits because we have sufficient liquidity in the system, Setty told reporters here.Also read: At Rs 35.9 crore, HDFC Bank's incoming boss Anup Bagchi set to be India's highest-paid bank CEOHe, however, added that if the credit growth continues at the ongoing elevated levels, some banks may have to look at raising deposit rates to fund the advances.Setty also acknowledged that depositors need to be compensated with some level of positive real interest rate in a scenario where inflation is inching up.On the credit growth, he said the country's largest lender will be able to sustain its loan book expansion at a rate of 14-15 per cent. While there is no ideal credit growth rate, at least in SBI, we believe that you have to be 2-3 per cent more than the nominal GDP. If you are looking at a nominal GDP of 12 per cent, 14-15 per cent growth rate (in credit) is something that will sustain the momentum of the growth, he explained.Also read: Govt asks banks to develop a sector-wide quantum transition along with an AI resilience frameworkSetty, who also chairs the industry grouping Indian Banks Association, dismissed fears of an imprudence in lending by the banks because of the nearly USD 133 billion deposit raise from the diaspora.He said the FCNR(B)-related liquidity will get consumed in the next 2-3 quarters. And 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 added.Asked if the RBI's rate hike of Wednesday, and SBI's house view of a 0.50 per cent more will help net interest margins, he replied in the positive but refrained from giving any levels citing silent period before the earnings announcement. ...in the next 2-3 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 2-3 quarters, he said.Setty added that over 50 per cent of the loans in the banking system are tied to the external benchmark-based lending rate, which get repriced as per RBI's actions on the repo rate.On the five-day work week demand over which bank unions had also threatened to go on strike recently, Setty said bank managements are engaged with all stakeholders on the issue through a committee formed under IBA, and it is premature to comment on the subject.Meanwhile, Setty said making banking simpler, relevant, personalised and more safe will be the key focus areas in the next stage of financial inclusion efforts.Stating that India is among the few countries where over 95 per cent of the population has a bank account, he said we also need to devote more attention to making these accounts more operational going forward.He 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.