‘Sub-6% de­posit rate will cause so­cial un­easi­ness’ There’s A Limit To Rate Cut By RBI: PNB Chief

The Times of India (New Delhi edition) - - Times Global - Sid­[email protected] times­group.com

SS Mal­likar­juna Rao moved to Pun­jab Na­tional Bank (PNB) last week. In an in­ter­view, he dis­cusses his plans for the merger of Ori­en­tal Bank of Com­merce and United Bank of In­dia with PNB. Ex­cerpts:

You have taken over at a time when merger of PNB, OBC and United Bank has been an­nounced. What are your pri­or­i­ties?

There is no sec­ond thought on why merg­ers are re­quired. Merg­ers will throw up won­der­ful op­por­tu­ni­ties and fair amount of chal­lenges. PNB will once again be the sec­ond­largest bank, with a well spread ge­o­graph­i­cal pres­ence, although there may be a few re­dun­dan­cies with re­spect of OBC. United Bank of­fers many ad­van­tages on foot­print. Chal­lenges are three-di­men­sional: One is busi­ness in­te­gra­tion, which is the eas­i­est since cus­tomers are be­ing served dig­i­tally. Sec­ond is tech­nol­ogy and if pre-in­te­gra­tion ac­tiv­ity is done prop­erly, it can be dealt with in a smooth man­ner. Third is employee in­te­gra­tion, where the best ser­vice con­di­tions among the three banks will be of­fered. Emo­tional in­te­gra­tion is an area where the top and mid­dle man­age­ment will move to work as a cat­a­lyst since things don’t change overnight.

How will you en­sure that your cus­tomers, es­pe­cially senior cit­i­zens, do not suf­fer due to branch clo­sure af­ter the merger?

Although a de­ci­sion has not been taken, a branch may be shut only if there is an­other one in a 2-km ra­dius. If there are three in this ra­dius, they will be as­sessed be­fore a de­ci­sion is taken. Banks are also look­ing at other ways for doorstep de­liv­ery of ser­vices.

While lend­ing rates are fall­ing, there is a con­cern that those with fixed de­posits, es­pe­cially senior cit­i­zens, may be af­fected...

In­ter­est rate re­duc­tion for ad­vances can’t be a panacea for the econ­omy. There is a limit be­low which you can’t re­duce rates. Repo rate has come down to the low­est level in the last nine to 10 years and there is an in­di­ca­tion that it may re­duce fur­ther. In our coun­try, if de­posit rates go be­low 6%, the


... A lit­tle bit of bullish­ness has re­turned and we are also work­ing to im­prove the sen­ti­ment through co-lend­ing (with NBFCs) and by gar­ner­ing new cus­tomers.

now. Re­tail and MSME lend­ing will im­prove re will be so­cial un­easi­ness as many senior cit­i­zens de­pend on the in­ter­est in­come. If al­ter­na­tive in­vest­ments are avail­able, prin­ci­pal is not al­ways as­sured. So, we need to en­sure in­ter­est rates are not very low. The sen­ti­ment that the RBI is cre­at­ing also has lim­i­ta­tions. Hope­fully, other fac­tors will play out and De­cem­ber on­wards, if there is an im­prove­ment in the econ­omy, there may not be too many re­duc­tions. Our mar­gins have come down from over 3% to 2.52.6%. Our de­posit rates are hov­er­ing around 6.5% but we may not go be­low 6%. Our as­set-li­a­bil­ity com­mit­tee will de­cide on it and also see if we will launch a term de­posit linked to the repo rate or MIBOR.

It’s been a week since the spe­cial of­fers and Navra­tri started. How is the re­sponse?

Re­sponse has been good but we will see growth pick up over a pe­riod of time. Since Novem­ber, when liq­uid­ity crunch started for NBFCs, auto loan sanc­tions were af­fected. Plus, there was con­fu­sion over elec­tric ve­hi­cles, which has been clar­i­fied by the gov­ern­ment. It also of­fered other in­cen­tives such as de­pre­ci­a­tion ben­e­fit. In the last few months, lot of lend­ing has taken place to NBFCs, which have also re­struc­tured their bal­ance sheets, re­sult­ing in eas­ier con­di­tions... Gov­ern­ment has al­ready an­nounced tax cuts, whose im­pact will also show.

There is a sur­prise ev­ery quarter and the worst does not seem to be get­ting over. What is the sit­u­a­tion in the cor­po­rate sec­tor?

Our econ­omy is in­ter­twined with the global econ­omy. The as­sess­ment of the worst be­ing over was premised on the prob­lems be­ing iden­ti­fied and tack­led in the large cor­po­rate seg­ment. Of late, cor­po­rate gov­er­nance is­sues have cropped up in the quasi-fi­nan­cial sec­tor. IL&FS was a big jolt to the sys­tem. Just when we thought that this was ad­dressed, some other com­pa­nies faced is­sues such as DHFL, Altico and now PMC Bank and HDIL. HDIL is un­likely to cre­ate any sig­nif­i­cant im­pact, we will wait and see how things play out at PMC Bank.

Ve­hi­cle de­liv­ery has started pick­ing up

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