‘If CASA Comes Down Fur­ther, Cut­ting Rates Will be Dif­fi­cult’

The Economic Times - - Markets: Beating Volatility - Mar­ket In­tel­li­gence

Af­ter declar­ing third quar­ter earn­ings, State Bank of In­dia chair­man Arund­hati Bhat­tacharya spoke on a range of is­sues vary­ing from the im­pact of de­mon­eti­sa­tion to re­cov­ery of bad loans, and the out­look on econ­omy. Saloni Shukla and Pratik Bhakta bring you the high­lights. Edited ex­cerpts:

Bad Bank Any­thing that will help to put th­ese stressed ac­counts into be­com­ing stan­dard would be wel­come. Now whether this is the best so­lu­tion or oth­er­wise is dif­fi­cult for us to opine, be­cause even in re­spect of a bad bank what you do need is cap­i­tal and with­out cap­i­tal it may not work. To that ex­tent, this is a de­ci­sion that the gov­ern­ment needs to take and they have not ap­proached us in this re­spect.

SBI Sub­sidiaries: SBI Life JV part­ners have now ad­vised that they would not like to dial-up, so there is no fur­ther ac­tion over there other than pre­par­ing for an IPO, which we will de­cide af­ter nec­es­sary con­sul­ta­tions with the board. In re­spect of SBI Cards, we are hop­ing that we would be able to com­plete this job quite quickly. Most of the ne­go­ti­a­tions are over and with a new part­ner com­ing in there are ne­go­ti­a­tions re­gard­ing the share­hold­ers agree­ment etc. We are very close to com­plet­ing the deal. For the gen­eral in­sur­ance busi­ness, the valua­tion is go­ing on be­cause the JV part­ner has in­di­cated that they would like to dial-up, so the ap­point­ment of the val­uer has hap­pened and the valua­tion ex­er­cise is cur­rently on. We have also put out a RFP for a JV part­ner in the pay­ments space, so that process is on.

As­so­ciates’ Merger De­layed: Cap­i­tal rais­ing plans will be put on hold be­cause there is the merger of as­so­ciate banks that will be hap­pen­ing. First we will go ahead with the merger and then only will we think about cap­i­tal rais­ing plans. We are quite ready for the as­so­ciate banks’ merger and as soon as the gov­ern­ment no­ti­fies the fi­nal or­der we will be ready to kick it off. We had planned to do it by March and we were quite ready for it. Again due to de­mon­eti­sa­tion, that has got de­ferred. So it will prob­a­bly be a de­fer­ment of a quar­ter.

In­ter­est Rate Out­look: Even if MCLR (lend­ing rates) has been brought down to 8% that will give us a big up­side on the mar­gin rather than the down­side. Also, if CASA comes down fur­ther, rate cut will be a prob­lem. The money that has come in has been de­ployed both in loans and trea­sury prod­ucts. But hav­ing said that, it’s a fact as CASA goes out, your cost of funds will go HIGHS & LOWS up. And as it goes up, it ob­vi­ously re­duces any space for any fur­ther re­lax­ation of in­ter­est rates.

Credit Growth: Over­all re­tail growth is 18%, but for cor­po­rate, the growth is very low. Though we do ex­pect that in the last quar­ter the cor­po­rate port­fo­lio will grow but even then we would like to be cau­tious, there­fore over­all we are not ex­pect­ing to be grow­ing beyond 6.5% for the full year. The loan book on the re­tail side in the month of De­cem­ber was sub­dued and we ex­pect some cor­po­rate


growth to surely pick up, like food pro­cess­ing and other SME ar­eas. Also, the cycli­cal in­dus­tries like cot­ton and sugar which got side­lined dur­ing de­mon­eti­sa­tion are re­cov­er­ing.

Out­look on De­posits: We have re­ceived .₹ 1,33,000 crore as de­posits, first we thought that the en­tire amount will go out but later we re­vised es­ti­mates and thought that at least 40% of that money will stay back. Now we think that more than 40% of the money de­posited in the bank could re­main back. The cash with­drawal bars on cur­rent and cash credit ac­counts have been lifted, so we are see­ing with­drawal in those ac­counts. But we will have full es­ti­mate on the money flow­ing out in a cou­ple of days. More or less our ex­pe­ri­ence is that money de­posited in ru­ral ar­eas will flow out be­cause those peo­ple did their busi­ness in cash. But in ur­ban ar­eas, a lot of money came in from peo­ple who had saved money in cash, that money is un­likely to go away.

Stressed Loans: We have al­ready given an out­look for slip­pages at around .₹ 40,000 crore for this year, I don’t see that num­ber com­ing down. But go­ing for­ward for the next year def­i­nitely th­ese things will start look­ing bet­ter. So far, we have clocked .₹ 29,000 crore of slip­pages. The fact of the mat­ter is that chunky pieces are ob­vi­ously out of the way. Over­all stress re­duc­tion will only hap­pen when the econ­omy is do­ing much bet­ter.


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