SBI Chairman Expects Downward Trend In Deposit Rates

Dinesh Kumar Khara, chairman of State Bank of India, said that deposit rates have spiked and will move southward in the medium-term. He also mentioned that the Reserve Bank of India may ease the interest rate cycle from the third quarter of the present fiscal.

Last week, RBI left its key interest rates unchanged for the eighth time in a row. It kept the focus on inflation amid robust economic growth.

"We are hoping that in the third quarter starting from October, perhaps there would be some possibility of inflation trajectory moving towards 4%, and that will be the right time when we can expect some interest cut (from RBI)," he said.

Some central banks from advanced economies like Switzerland, Sweden, Canada and the Euro area have begun their rate easing cycle during 2024.

On the other hand, market expectations of a rate cut by the US Federal Reserve, which was higher earlier, have moderated subsequently.

As far as the interest rate in the banking system is concerned, Khara said more or less they have already peaked.

"Going forward, we will get to see some marginal changes... I think, if we look at the medium-term trajectory of interest rate, perhaps it would be a downward trend," he said.

Last month, SBI hiked the fixed deposit rate on select short-term maturity up to 75 basis points.

For retail term deposits of 46-179 days, the rate has been increased by 75 basis points to 5.50% as against the earlier 4.75%.

There has been a 25 basis point increase in the other two maturity buckets—180-210 days and 211 days to less than 1 year to 6% and 6.25%, respectively.

SBI had left interest rates unchanged on other maturity buckets beyond one year.

(With inputs from PTI)