Dinesh Kumar Khara, Chairman of State Bank of India (SBI) believes the Reserve Bank of India (RBI) could begin interest rate cuts from the third quarter of the calendar year 2024.
Speaking to CNBC-TV18's Shereen Bhan on the sidelines of the Davos World Economic Forum (WEF) 2024, Khara said, as far as interest rate cut is concerned, the monetary policy committee (MPC) has very clearly indicated that they would like to have the inflation rate of around 4% and we are somewhere around 5.5%.
"What I expect is that going forward, there should be better situations to prevail and once the US Federal Reserve starts cutting interest rates, not before the middle of this calendar year, but maybe in the third quarter, we expect that there could be some interest rate cut which we might get to see," he said.
Khara said RBI has asked banks to keep a check on their credit-deposit (CD) ratio to prevent overheating of the system. SBI, he noted, currently has a CD ratio of 66-67% on its domestic book and around 70% on its international book. So, there is a lot of headroom available for growth.
The RBI had asked some banks to reduce their CD ratio to less than 75%, while stating that it has no intention of setting a benchmark ratio. Instead, the ratio should be determined by individual banks based on their board-approved business plans.
Khara also talked about the increasing interest in India from global investors. He believes this is because of the resilience that the Indian economy has demonstrated in recent times.
"Many of them are very keen to look at their supply chain relocation, and they want India to be a part of the supply chain. So, I think to that extent, India story is quite promising," he said.
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(Edited by : Shweta Mungre)
First Published: Jan 16, 2024 2:26 PM IST
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