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State Bank of India chairperson Arundhati Bhattacharya hopes to see a pick-up in credit growth as the base interest rate comes down, though she hastens to add the bank’s asset-liability committee will take a call after the monetary policy review on Tuesday.
Bhattacharya also tells Business Standard the overall stress on asset quality is indeed coming down and the bank will start offering wealth management services this financial year. Edited excerpts:
SBI’s net interest income in the fourth quarter was close to Rs 15,000 crore (Rs 150 billion), including Rs 1,000 crore (Rs 10 billion) earned as interest from deferred tax payment. Do you think the bank can hold on to its margins, since credit pick-up is yet to happen?
Domestic net interest margin was 3.54 per cent. We should be able to keep it around 3.5 per cent. Having said that, we hope to see a pick-up in credit growth as the base rate comes down.
My treasury book has gone up 23 per cent because the deposits that are coming are mainly going towards investment in bonds, as there is hardly any credit growth. The moment it moves into the credit piece, there will be a pick-up in interest income, which will hold my NIM steady.
Why have you delayed cutting the base rate?
Because we wanted the credit growth to come back. It’s a bit of a chicken-and-egg problem: Do you reduce the interest rate, so that credit growth comes back, or is it the other way round?
Over a period of time, we will get it right (laughs). We have already reduced the interest rates somewhat, so let us see what happens on Tuesday (in the Reserve Bank of India’s bi-monthly policy review).
We will take a call after we know whether there is a reduction in the repo rate or not. We will try to ensure more credit growth.
If the Reserve Bank of India (RBI) cuts the repo rate on Tuesday, will SBI reduce its base rate?
That’s a question only my asset-liability committee can answer. I am not going to preempt the Alco. Just wait for a few more hours and you will know.
Many banks have said reduction in the cash reserve ratio would allow these to reduce rates more than a repo rate reduction. What are your views?
My views are also very similar.
A CRR cut gives us tangible benefits immediately.
A 50-basis-point CRR cut will give us a benefit of seven basis points.
If there is a repo rate cut, that does not give me anything. At present, 97 per cent of my resources are deposits, so I need to borrow very little from the markets.
Have you seen signs of a revival in credit demand?
We are beginning to see some new projects coming -- brownfield (old) as well as greenfield (new).
Some of them are in the renewable energy space, pipeline space, LNG terminal space, etc.
A lot of discussion is going on regarding township projects, smart townships, etc.
We are beginning to receive those proposals or at least discuss those proposals. These things take time. Our target for credit growth is 14 per cent, while the deposit growth target is 15-16 per cent.
After the fourth quarter results, you had said the worst was over on asset quality. In the past two-three years, the fourth quarter has always been better than the third. Is there a seasonality factor behind the lower non-performing-asset (NPA) numbers in the fourth quarter?
There is always a seasonality factor.
A lot of efforts go during the entire year. All these fructify in the last quarter. Whether it is other income or asset quality, there is always a seasonality factor.
Notwithstanding this factor, overall, we are seeing stress coming down.
In the fourth quarter, written-off accounts and loans sold to asset reconstruction companies also helped to reduce NPAs. Will we see this happening in the coming quarters also?
In the first quarter also, we had sold loans to ARCs. In the second and third quarters, we could not, because the norms had changed.
But today, I do not see any reason why it should not be replicated in other quarters.
But the first quarter could be a slightly weaker quarter for asset sales, as typically most promotions and transfers of our officers take place during this period. So, sometimes that causes a bit of slackness.
But, going forward, you will see asset sales happening. We have a clearly laid-out system now.
There is a particular day on which whatever is there on the books of stressed asset management group, the information memorandum is immediately circulated.
There is a specific day when we receive bids from the 14 ARCs and there is a date given when we open the bids.
Everything is now according to a calendar. We have tried to take out the seasonality factor.
How much of security receipts do you hold?
Around Rs 4,000 crore (Rs 40 billion).
RBI has allowed banks to finalise the debt recast plan till June 30, proposals for which were submitted on or before March 31. What is in the pipeline?
It’s about Rs 2,600 crore (Rs 26 billion).
How much of slippages have you seen from restructured assets?
We had given a guidance of 18-22 per cent slippage. But last year, we saw a slippage of only 14.71 per cent of the restructured accounts. We normally restructure those accounts that will bear up.
SBI started to reduce deposit rates from as early as September 2014. But your cost of funds has remained flat. What is the reason?
What has happened is that the mix between current and savings accounts deposits and term deposits has gone against us. Term deposits grew by 22 per cent, while Casa growth was nine per cent.
The Casa growth has improved since 2013-14, when it was five per cent. Customers have shifted funds from Casa to term deposits, as they are expecting interest rates to come down. If I had not cut deposit rates, our cost of funds would have gone up.
How much capital infusion are you expecting from the government?
We do not know as yet. We will be doing a presentation to the government shortly.
What are your plans for tapping equity markets?
We have permission to raise Rs 15,000 crore (Rs 150 billion) by way of qualified institutional placement, follow-on public offer, etc. All the approvals are in place. If we get a proper window of time, we will raise [the money].
It seems there are some issues in the joint lenders forum formed to resolve stressed assets. Big banks and small banks do not agree on particular restructuring proposals. What exactly is the problem?
The fact is that everybody is not able to move in step. We have to understand that if you are having a joint lenders forum, then everybody should have the ability to take calls.
Now, very often very junior people come into the JLF and they are not in a position to take decisions.
In addition, some banks do not have a chief executive. Even though there are very responsible people heading those banks, they have a very limited period of time.
As a result, they also may not be keen on taking decisions that later on could be questioned. The entire community of banks is not able to move in step.
That is why these things are not happening as quickly as they need to be. Sometimes, the smaller lenders feel that their interests are not getting taken care of.
Larger lenders would say that to gather 28 banks together is a very difficult task. Therefore, four or five largest banks come together and take decisions.
The smaller lenders may have reduced risk appetite, because they cannot afford to lose anything. Now, if you have a reduced risk appetite and if you are not going to sanction those limits, who takes the slack?
So far in 2015, SBI has not gone for any fund raising abroad. Any plans later?
We will probably do some [fund raising abroad]. At this point of time, we have not yet decided the quantum. We will go for dollar raising.
The bank has taken various initiatives on the technology front. What is your USP?
The USP for us is the fact that we are everywhere. We have also been around for a very long time. If you look at our range of products, pricing, the sheer reach -- physical or otherwise -- we give the kind of stability that no other bank in India does. Being the biggest bank enables us to offer a sense of security to customers.
There will be many more offerings. We are already working with Snapdeal, PayPal, Amazon. So we are doing a lot of initiatives there.
We are working on a very good wallet that will be coming out very shortly. We are working on our wealth management initiative also, which will come out very shortly.
The online customer acquisition software has also been launched. In the first few hours, we sourced more than 900 customers on the online customer acquisition piece. So we are doing a large number of things.
When do you plan to launch wealth management services?
Wealth management, financial planning, financial counseling -- all of that will come. At this point, we are considering doing it through the bank — and it will not be a subsidiary. This will be launched in this fiscal itself.
Do you see your joint venture partners in life and non-life insurance businesses increasing stakes?
There will be some action there, though what has stopped us is the regulation regarding open architecture. This will have an impact on valuations. We are waiting to see the final guidelines before firming up some numbers.
There is market speculation that SBI Life Insurance will hit the initial public offering market shortly.
It could. I can’t really tell you right now.
Is there a change in partnership in SBI Cards?
GE is exiting all its financial commitments. So, they would like to do that in respect of SBI Cards also.
But they are in no hurry. They will not do anything that will reduce valuations. They are willing to wait for two-three years, if required. We will see what really happens.
