Will Reduce Rates Once Marginal Cost Of Funds Comes Down, Says SBI Chief 
Rajnish Kumar, chief executive officer of State Bank of India Ltd., speaks during a panel session on day two of the World Economic Forum (WEF) in Davos. (Photographer: Jason Alden/Bloomberg)

Will Reduce Rates Once Marginal Cost Of Funds Comes Down, Says SBI Chief 

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State Bank of India’s Chairman Rajnish Kumar said the bank has already cut the interest rate and will reduce it further with decline in marginal cost of funding.

The Reserve Bank of India had last week cut the repo rate by 0.25 percent, but the country’s largest lender—SBI—announced only a 0.05 percent reduction in interest rate on home loans of up to Rs 30 lakh.

“Whatever cushion we had, we have already reduced our rates. If our marginal cost of funding comes down, then that benefit we will pass on to borrowers,” Kumar told reporters.

Earlier, speaking at a CREDAI conference in New Delhi, Kumar made a case for developing the corporate bond market to help fund projects with long gestation period and reduce the burden on banks for funding infrastructure projects.

“In India, still banks play a prominent role... Bond market is sill not developed and since bond market is not developed the dependence on banks for the capital is huge. So we need to do more to develop bond market,” Kumar said.

He said the dependence on banks for funding projects will continue for few more years till the time an alternative mechanism is developed, particularly for projects where the gestation period is long.

Financing long-term projects puts new responsibility on the banks who have traditionally been working capital lenders, he said.

Also read: SBI Cuts Interest Rate By Five Basis Points On Home Loans Up To Rs 30 Lakh

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