State Bank of India Chairman Dinesh Kumar Khara has pitched for tax relief on interest income, saying it would help banks to garner savings that could be used for funding long-term infra projects.

Currently, banks are required to deduct tax when interest income from deposits held in all the bank branches put together is more than Rs 40,000 in a year.

About savings accounts, interest earned up to Rs 10,000 is exempt from tax.

Union minister for finance & corporate affairs, Nirmala Sitharaman, on Wednesday, chaired the first pre-budget consultation with India’s leading economists.

This crucial meeting set the stage for the upcoming full budget formulation, bringing together top economic minds to provide valuable insights and recommendations. The meeting was also attended by senior officials from the ministry.

Also Read: ‘Ache Din’ For Taxpayers Soon? Govt Plans To Hike Income Tax Exemption Limit, Check Latest Details Here

Incentive To Depositors

“If at all some relief could be given in the Budget regarding tax on the interest earnings, it will be an incentive to depositors. Eventually, the banking sector uses deposits mobilised for the capital formation in the country,” the SBI chairman told PTI in an interview.

The Full Budget for 2024-25 is likely to be presented by Finance Minister Nirmala Sitharaman in the Parliament next month.

Given the current economic growth rate, the SBI chairman is expecting 14-15 per cent loan growth during the fiscal year 2024-25.

“Normally the way we look at it is that the GDP growth rate plus inflation and 2-3 per cent over that. That gives us the number around 14 per cent or so,” he said.

“Hence, 14-15 per cent credit growth depends upon the opportunities available for lending, and it meets our risk appetite. We will be happy to grow at this pace,” he said.

As far as deposits are concerned, he said, it grew by 11 per cent last year.

“And we have some elbow room available in terms of excess SLR…which ensures that we don’t have any pressure on us to raise the deposit rates for supporting our loan-to-deposit ratio,” he said.

The bank has an excess Statutory Liquidity Ratio (SLR) between Rs 3.5 lakh crore and Rs 4 lakh crore.

“Incidentally, I may add here that our loan-to-deposit ratio is around 68-69 per cent only. That leaves enough room for us to lend without having pressure on the deposit interest rates.

Nevertheless, he said, “We always give importance to deposits. That is the reason why we increased the interest rate for the short-term deposits recently because we felt that there’s room for improvement…we should improve our deposit growth rate to some extent during this year. And our effort would be that we should at least grow around 12-13 per cent this year.”

Last month, SBI hiked the fixed deposit rate on select short-term maturity up to 75 basis points.

For retail term deposits of 46-179 days, the rate increased by 75 basis points to 5.50 per cent against the earlier 4.75 per cent.