SBI Chairman Predicts Stable Deposit Rates Despite RBI Hike

State Bank of India Chairman C.S. Setty announced that deposit rates are unlikely to increase for the next two to three months, citing sufficient liquidity within the banking system. This outlook follows the Reserve Bank of India's October 7 decision to implement its first rate hike in nearly four years and shift its monetary policy stance toward calibrated tightening.

Setty indicated that the tightening cycle will likely expand banks' net interest margins for up to three quarters, as more than 50% of loans are linked to external benchmarks that reprice quickly. While the State Bank of India aims to maintain credit growth between 14% and 15%, Setty cautioned that banks may eventually need to raise deposit rates if credit growth remains elevated or to ensure depositors receive positive real interest rates as inflation rises.

Addressing concerns over imprudent lending following a USD 133 billion deposit raise from the diaspora, Setty noted that the Reserve Bank of India is taking active measures to absorb excess liquidity from the system.