Apart from the difficulties arising due to base rate system coming into effect from April 1, 2010, the Reserve Bank of India's directive to calculate interest on savings bank deposits on daily basis will put SBI under great pressure in terms of margin.

But Chairman Mr. O.P.Bhatt said that it will not let this pressure affect its customers. The bank is unlikely to increase deposit rates till May- June as per Mr. Bhatt. As on December end, the bank had a liquidity overhang of Rs. 75,000 crores.

As a resultant of the increase in cash reserve ratio by 75 basis points by RBI, IDBI bank and HDFC Bank have increased fixed deposit rates.

The payment of interest on savings deposits on a daily basis is likely to have an impact up to 25 basis points on margins of SBI. "Our operating margin will come under pressure by 20-25 basis points once we start calculating interest on a daily basis. Our savings account deposits constitute close to one-third of our total liability, so there will be some impact due to this move. Our cost of deposits may go up by 60-70 bps. However, we may not pass the additional burden to customers," Bhatt said.

However, with the incorporation of the base rate system from 1st April, 2010 the average yield on advances may increase which in turn might compensate for the reduction in margins.

As per Mr. Bhatt, SBI's base rate is likely to be in the range of 8-9%.

The Indian Banks Association (IBA) is in regular discussion with RBI regarding the various issues arising out of the base rate system. Some of these issues are loan pricing to bank employees, priority sector lending like lending to housing firms.