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    Pause gives banks breathing space, rate cut likely in December: SBI MD

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    By Nandini Sanyal

    Copyright indiatimes

    Pause gives banks breathing space, rate cut likely in December: SBI MD

    ETMarkets.com

    The Reserve Bank of India’s (RBI) latest Monetary Policy Committee (MPC) meeting has maintained the status quo on policy rates, a decision widely expected by markets. According to Vinay M Tonse, Managing Director, State Bank of India (SBI), the pause provides much-needed breathing space for banks to realign operations without additional margin pressure.Speaking to ET Now, Tonse said that rate transmission has already played out significantly in the banking system. “On the asset side, the adjustment happens almost instantly. On the deposit side, we have limitations, but since February we have seen more than 106 basis points transmission on fresh deposits and about 22 basis points on overall deposits,” he noted.He further added that SBI expects the terminal repo rate to settle at 5.25%, with a potential rate cut in December. “Our house view is that the cut may come in the next MPC. The pause at this stage makes sense, given that growth and inflation remain stable,” Tonse said.Busy season demand boostTonse highlighted that the traditional busy season is setting in earlier this year, partly due to recent GST rate cuts. “We are seeing uniform traction across segments, though I cannot share specifics as SBI has entered the silent period post-Q2. This is a classical play-out of the business season, just a little earlier than usual,” he said.Prepared for ECL frameworkOn the RBI’s announcement of a glide path for the Expected Credit Loss (ECL) framework till FY31, Tonse said SBI is well-prepared. “We have already factored in the impact on our growth and asset book. The realignment will happen automatically. We are mentally prepared for implementation,” he said.Live EventsYou Might Also Like:Why the RBI kept repo rate unchanged today and what a neutral stance meansHe welcomed RBI’s move on financing acquisitions, which he believes will smoothen credit flows. “There is no supply-side issue today; the challenge is demand. With corporates holding significant cash, the move will support credit growth, particularly for listed companies under the new guidelines,” Tonse added.Risk-based deposit insurance a big positiveThe RBI also proposed risk-based deposit insurance premiums to incentivize sound risk management among banks. Tonse welcomed the move, saying it would especially benefit large banks like SBI. “Risk pricing happens everywhere else, so why not here? SBI will definitely gain from this shift,” he said.With the RBI choosing to wait and watch while strengthening regulatory frameworks, banks are optimistic about sustained credit growth and margin stability. For SBI, Tonse believes the policy pause sets the stage for stronger business momentum ahead of the December review.You Might Also Like:RBI permits AD banks in Bhutan, Nepal, Sri Lanka to lend in rupees; NRI rules eased(You can now subscribe to our ETMarkets WhatsApp channel)

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