Favouring a soft interest rate bias, the State Bank of India on Wednesday set a target of reducing its non-performing assets to two per cent of its advances by this fiscal end.

"We are targeting to bring down the net NPAs to two per cent of the net advances this fiscal," SBI chairman A K Purwar said after a review meeting of banks in New Delhi.

Public sector banks on an aggregate reduced their NPAs to 4.5 per cent, mainly due to the drastic reduction of bad loans by SBI and its associate banks.

Public sector banks now target two per cent average NPA this fiscal.

If the Reserve Bank of India enforces the new norms for NPAs, the bank may have NPAs of three per cent, he said.

The RBI is considering a new NPA provisioning norm from March 31, 2004, whereby if a company fails to repay interest or principal within 90 days, the lender bank has to treat it as an NPA account.

Purwar ruled out an immediate revision in the lending rate but kept options open for further softening of the rates.

"We have reduced our prime lending rates soon after the bank rate cut by the RBI. As of now, we will keep it as it is. The soft interest bias will continue," he said.

The SBI also favoured the reduction in interest rate on credit cards, which is nearly 31 per cent.

"We will go by volumes. We are now number two in the credit card segment. We will be number one in this fiscal," Purwar added.