Jul 22, 2013 02:27 PM IST | Source: CNBC-TV18

Haven't changed liquidity position post RBI moves: SBI

SBI has registered substantial credit growth in its retail segment. Meanwhile, SBI recently told media that it needs Rs 2,30,000 crore in additional capital to meet the stringent Basel-III requirements till 2018.

India’s largest public sector lender State Bank of India (SBI) is currently comfortable with its liquidity situation. Managing director A Krishna Kumar told CNBC-TV18 that the bank is not looking to change liquidity position post steps taken by Reserve Bank of India (RBI) to protect the falling rupee.

“The measures taken by the RBI are purely temporary in nature,” he said. Kumar doesn’t foresee major tightening of rates by the central bank in its monetary policy review on July 30. But added some easing of interest rates going ahead would come as a relief. The bank will take a decision on rate cut post RBI policy.

RBI raised bank rate by 200 bps to 10.25% from 8.25% on July 15. It has also hiked marginal standing facility (MSF) rate 300 basis points above the policy repo rate under the liquidity adjustment facility (LAF) to 10.25%. (Read More).

Speaking about the bank’s operations, he said that the SBI has registered substantial credit growth in its retail segment. Meanwhile, SBI recently told media that it needs Rs 2,30,000 crore in additional capital to meet the stringent Basel-III requirements till 2018.

Below is verbatim transcript of his interview on CNBC-TV18

Q: What is your observation on what the Reserve Bank of India (RBI) had to announce last week and the impact on liquidity in the system especially for banks such as yours?

A: As far as we are concerned, we have not seen any significant change in the liquidity position for our bank we are still comfortable as of now.

Q: The fear on that day was that eventually rates might even harden in the system, a possibility that nobody was even considering a few weeks back. Do you think this liquidity tightening that the RBI has resorted to could eventually spill over to measures like tightening or hiking of the Cash Reserve Ratio (CRR)?

A: I would not like to second-guess what the RBI would be doing next week on the 30th when the policy measures are announced. However,  I do not believe that there will be any significant tightening of the rates right now. The measures announced by RBI have just been designed to bringsome sort of discipline in the market.

Q: Is it your sense then that they look like temporary measures that would last only a couple of weeks because the fear is that they maybe more longstanding in nature and may start impacting the rates that banks such as yours offers both in terms of lending and deposit rates as well?

A: I personally believe that these measures are purely temporary. It could maybe a couple of weeks or a month or so, but my belief is that it is purely temporary in nature.

Q: Things are not improving on the ground with sectors like infrastructure. That is quite evident from every data point that is coming in. Do you fear that maybe your stressed asset book will grow in the months to come, that you will probably have many more requests for restructuring of assets?

A: Yes. The growth in credit is more coming-in from the retail part of it. The retail book is growing very strong. It is the corporate side where the credit growth has not been as robust as we thought it would be. The state of economy right now and other external factors are not helping. So, going forward there could be stresses, but then we really cannot give any prognosis on this. Let us see how it goes.


Q: While rates may not move up as you indicated or to your mind would you say because of the actions of last week it is difficult for banks such as yours to provide any cuts in rates? Some PSU banks have reversed their decision of base rate cuts over last week.

A: While we never had thought about revising the rates at all in the last few weeks in fact, but again the decision to cut rate or not would depend a lot on the measures announced next week, during the policy.

Q: What is happening on the ground with credit growth? Are you seeing continuing sluggishness there, because a few weeks back there was some hint of a pick up but would you say that things have not improved with the credit growth outlook?

A: The growth in retail book is pretty strong. Our home loan book has grown in the first quarter roughly on a Y-o-Y basis of around 18 percent which is fairly substantial considering the circumstances. Also the agricultural credit growth is around the same level, 18-20 percent on a Y-o-Y basis.

So, as far as retail book goes there has been a substantial increase in the credit growth. It is only in the corporate side that there is some sluggishness.

Q: What would you say to the fear that also arose last week of increased delinquencies going ahead and that there could be more loan defaults from corporates who have taken loans from banks? Is that concern overdone or do you think it is a legitimate concern given the current environment?

A: No, there is certainly a concern on that aspect. I would not say it is overdone. The concern is definitely there. It depends on how the corporates manage to keep their repayments intact and keep their accounts regular. Yes, there is a concern, but I do not think it is something which is very overwhelming at the moment.

Q: Have you got more requests for restructuring in the last 2-3 weeks? Some of the well-known corporate houses also seemed to be clamouring for some kind of restructuring.

A: I do not have the exact numbers with me right now, but I do not believe there is any great increase in the number of requests for restructuring. It is just as has been in the past.

Q: Would you say expectations are low though in terms of the RBI providing any liquidity relief to banks come their next policy meet or even though one after?

A: I would not like to second-guess what the RBI does, but I do hope there is some relief in terms of the rates going ahead.

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