Liquidity position across banks is at comfortable level: Experts

Aug 01, 2017 09:59 AM IST | Source: CNBC-TV18

In a landmark step, SBI cut interest rates on savings accounts that hold less than Rs 1 crore. This is the first such move by any bank in India’s history. In an interview to CNBC-TV18, Dinabandhu Mohapatra, MD & CEO of Bank of India and Vivek Rajpal, Rates Strategist at Nomura assessed the impact on the sector.

In a landmark step, State Bank of India (SBI) cut interest rates on savings accounts that hold less than Rs 1 crore. This is the first such move by any bank in India’s history.

In an interview to CNBC-TV18, Dinabandhu Mohapatra, MD & CEO of Bank of India and Vivek Rajpal, Rates Strategist at Nomura assessed the impact on the sector.

Mohapatra said that liquidity position across banks is at a comfortable level.

According to him new market dynamics will push other banks to reconsider their positions and examine savings rate.

Savings accounts contribute 37-38 percent to total deposits in the bank, he added.

Nomura’s Rajpal said that SBI’s move to cut savings bank rates reflects ample liquidity in the system.

He further said that it puts downward pressure on the rates throughout the system.

“A move lower in saving bank rate has given an indication to the market or it is reflective of the fact that there is no credit demand in the system and there is ample liquidity in the banking system which needs to find its way somewhere,” said Rajpal.

Watch accompanying video for more details.

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