New Delhi. State Bank of India (SBI) Chairman CS Shetty has said that the Reserve Bank of India (RBI) will probably not cut the key policy rate this year in view of the uncertainty on the food inflation front. The US central bank Federal Reserve may possibly reduce the interest rate in the monetary policy review to be presented on Wednesday. If this happens, it will be the first time in more than four years that it will cut the policy rate. It is believed that central banks of other countries will also be inspired to follow this.
Shetty, who recently took over the reins of SBI, said in an exclusive interview to PTI, “Many central banks are taking independent decisions on the policy rate front. However, the Federal Reserve’s interest rate cut will affect everyone, but the RBI will keep food inflation in mind before taking a decision on interest rate cut.” He said, “This is our view. We also believe that the policy rate will probably not be cut this year. Until food inflation comes down, it is difficult to cut the policy rate and for this we may have to wait for the fourth (January-March 2025) quarter.
The Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das will decide on the policy rate in its meeting to be held from October 7 to 9. The MPC is paying attention to retail inflation while considering monetary policy. Retail inflation rose marginally to 3.65 percent in August, from 3.54 percent in July. Although inflation is below the RBI’s average target of four percent, the inflation rate of food items was 5.66 percent in August. The central bank kept the repo rate unchanged at 6.5 percent in the August bi-monthly monetary policy review, given the risk of high food inflation. This was the ninth consecutive time that the repo rate was not changed. The Reserve Bank has not changed the standard repo rate since February 2023.
On the question of SBI selling stake in some subsidiaries, Shetty said that at present there is no consideration about divestment of stake in any subsidiary. He said, “If these subsidiaries need (development) capital, we will definitely look into it.” Shetty said that at present no major subsidiary needs capital from the parent company to expand its operations. The bank had infused additional capital of Rs 489.67 crore in SBI General Insurance Company Ltd in FY 2023-24. The company has also allotted shares to employees under the Employee Stock Ownership Plan (ESAP). As a result, the bank’s stake has come down marginally from 69.95 per cent to 69.11 per cent.
