SBI will cut interest rate based on evolving circumstances: Arundhati Bhattacharya

State Bank of India (SBI), the country's largest bank, would decide on reducing its interest rates on the basis of emerging circumstances, SBI Chairperson Arundhati Bhattacharya said on Wednesday after the Reserve Bank of India (RBI) cut its repo rate by 25 basis points expecting inflation to soften in the coming financial year.

Welcoming the decision by RBI to cut its repo rate by 25 basis points, Bhattacharya said, "Our bank will take an appropriate call of a cut in base rate by looking at all evolving circumstances."

She said with the government embarking on a path of qualitative fiscal consolidation and the formal adoption of inflation targeting, inflation trajectory was expected to stay benign and would aid banks in their decision making.

The RBI, after cutting the repo rate - the interest commercial banks pay for borrowing money from the central bank to meet short-term fund requirements - also expressed concern over the postponement of fiscal consolidation by a year to 2017-18.

Getting some positive cues from the Union Budget presented on Saturday (February 28), and sensing an economic recovery, the repurchase (repo) rate has been cut to 7.5 per cent from 7.75 per cent, while the reverse repo rate has been adjusted to 6.5 per cent from 6.75 per cent.

The reverse repurchase rate is the interest central bank pays when surplus short-term funds are parked with it by banks.

The rate cuts immediately follow a far-reaching agreement between the government and the Reserve bank on Monday under which the apex bank will aim to bring the country's retail inflation below 6 per cent by January 2016 and to around 4 per cent by the end of 2016-17.