SBI Chairman Dinesh Kumar Khara suggests tax relief on interest income to boost savings for long-term infrastructure projects. Currently, banks must deduct tax when interest income from total deposits exceeds Rs 40,000 yearly. For savings accounts, interest up to Rs 10,000 is tax-exempt.
If tax relief on interest earnings is provided in the Budget, it would encourage depositors. Ultimately, banks utilize deposits for capital formation in the country. Finance Minister Nirmala Sitharaman is expected to present the Full Budget for 2024-25 next month in Parliament. Due to the current economic growth rate, the SBI chairman anticipates loan growth of 14-15% in the fiscal year 2024-25.
He typically considers GDP growth rate plus inflation, adding 2-3% on top of that. This calculation yields around 14%. Therefore, achieving 14-15% credit growth relies on lending opportunities and aligning with their risk tolerance. They are content with growing at this rate.
Regarding deposits, he mentioned that they increased by 11% last year. He also noted that they have some flexibility due to excess SLR, which prevents the need to raise deposit rates to support their loan-to-deposit ratio. The bank holds an excess Statutory Liquidity Ratio (SLR) ranging from Rs 3.5 lakh crore to Rs 4 lakh crore. Additionally, he mentioned that their loan-to-deposit ratio stands at approximately 68-69%, providing ample space for lending without impacting deposit interest rates.
He mentioned, “We prioritize deposits. That’s why we recently raised interest rates on short-term deposits as we saw room for enhancement. Our aim is to boost our deposit growth rate this year, targeting around 12-13% growth.” Last month, SBI raised fixed deposit rates by up to 75 basis points for select short-term maturities. For retail term deposits lasting 46-179 days, the rate increased by 75 basis points to 5.50% from the previous 4.75%.
