The 90-basis point (bp) rate cut is expected to improve credit growth for the country’s largest lender State Bank of India (SBI) to eight-nine% for the financial year 2016-17. So far, credit has grown at an unimpressive 6.7-6.8% since April 2016, SBI Chairman Arundhati Bhattacharya said. This is a decline, compared with SBI’s loan growth estimate at the beginning of the financial year of 11-12%. The demonetisation move has led to a slump in the economy and is a major reason for the drop in credit demand. SBI is looking at the retail segment to grow its credit portfolio. The bank is looking at kick-starting growth in its loan book and has introduced a teaser home loan scheme, which offers a fixed rate for two years at 8.5% for women and 8.55% for men (see box). It has reduced floating interest rate from 9.15% to 8.6% for home loans up to Rs 75 lakh and to 8.65% for higher amount. Bhattacharya said Sunday’s lending rate cut of 90 bps was liquidity-driven. She expects the current situation of cash shortage to become normal by end-February or March. Gross advances had grown by 13.04% in 2015-16 to Rs 15,09,500 crore from Rs 13,35,424 crore in 2014-15. The pace of growth moderated in six months ended September 2016. Gross advances increased by 8.11% year-on-year to Rs 14,81,831 crore at the end of September 2016. As corporate credit demand remains lacklustre, the bank is pinning hopes on retail credit (home loans, auto and consumer durables etc). Retail advances increased by 20.4 per cent from Rs 2,91,043 crore in September 2015 to Rs 3,50,465 crore in September 2016. Home loans grew by 20.38% from Rs 1,70,899 crore in September 2015 to Rs 2,05,734 crore, as of September 2016. Referring to the surge in low-cost deposits, the SBI chairman said the bank had received about Rs 1,60,000 crore in low-cost deposits after demonetisation till the end of December. Bhattacharya expects 40% of these deposits to stay with it, compared to earlier estimates of 10-15%. The bank would review interest rate on deposits only in April 2016, after observing the pattern of outflows, she added. The overall deposits have grown by 21.2 per cent by December 2016 on a year-on-year basis, SBI managing director Rajnish Kumar said. Meanwhile, the merger of SBI’s five associate banks and Bharatiya Mahila Bank (BMB) with SBI will miss the March 2017 deadline, as the country’s largest lender awaits government notification. Bhattacharya said the mega-merger could be pushed to the next financial year. Bhattacharya said, “Even if the government approval comes through, doing things like a merger in the last quarter is never a very wise thing because there would be a lot of information technology system changes.” The merger was to make SBI a global-sized bank and would be amongst the top 50 lenders in the world, with an asset base of Rs 37,00,000 crore (over $555 billion), with 22,500 branches and over 58,000 automated teller machines and more than 500 million customers. SBI has three listed associate banks – State Bank of Bikaner & Jaipur, State Bank of Mysore, State Bank of Travancore – and two unlisted associate banks – State Bank of Patiala and State Bank of Hyderabad. The bank had announced the merger in May and its central board of directors had, in August, approved the process along with the share swap ratio for three of the listed associate banks and BMB. At that time, it was announced that the merger would be completed by end-March 2017.