Daily interest deposits to dent margins by 12 bps: BoB

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Q: Would the calculation be similar? What could be the hit in your case?

Sitaram: It depends upon the CASA composition of each bank. The hit will be lower for those banks which are having lower CASA. We have not done the exact calculation.

Q: What your exposure is to real estate loans and loans to infrastructure companies from a debt perspective? Banks have been lately very active trying to buy into new IPO from your perspective as you stand right now. Can you give us some percentages?

Sitaram: We don't have too much exposure to commercial real estate because right form the beginning we have been conservative in this area. It's about half a percent of our portfolio.

Q: How active, whether from a retail perspective or directly form developers, have you been directly form the real estate side and perhaps from the infrastructure lending side on the debt component? Have you been subscribing to any of the IPOs that have been in the market?

Bakshi: We at BoB have always followed a reasonable risk and reward policy. Despite attractive revenues, it could be generated from some sectors. We have confined our lending exposure. Our exposure to commercial real estate maybe about 3.5%. Infrastructure is the fastest growing sector of all the credits of banks together. Infrastructure is a conglomerate of various items that includes ports, roads, telecom and power. These are the four major sectors. Apart from certain other small sectors, for infrastructure, our exposure maybe in the domestic segment. It maybe about 11%. There are a number of sanctions also which are in the process of getting disbursed.

Q: What do you expect from the Budget by way of the government borrowing program? What do you think interest rates and bond yields may touch in the first quarter of for the current year? Are you expecting any thing else in terms of the disadvantage in terms of banks? Are you expecting the taxes on money market mutual funds be brought on par with fixed deposits?

Bakshi: That is a wish list which always continues but I don't think we are anywhere near seeing any fulfillment of that. It will depend on a number of factors and that will be particularly the extent of stimulus withdrawal to the extent of what the government decides upon. In percentage terms, the fiscal deficit might go down.

As far as the bond yields are concerned in a fit of reactions, the bond yields may definitely move up. Ultimately it's not only a question of the RBI signals. Last year the borrowings could be done smoothly because the liquidity was plush in the system. This time credit sanctions are a plenty. Therefore, there might be some pressure on this but there are a lot of claimers now.

The banking sector deposits were to grow by 20%. The banks themselves would require about Rs 2 lakh crore of incremental SLR investment. There are other claimants like insurance companies and others who want to invest but it will definitely push and I cannot speculate on the quantum it may affect. However, it may definitely push the bond yields a bit dearer.

Q: What is your exposure to infrastructure? Now you could break it up by telecom, power, road infrastructure and port infrastructure. Can you give us the ratio of sanctions to actual disbursements because in this area it looks like a lot of sanctions are happening but the disbursements not keeping pace?

Sitaram: As far as infrastructure is concerned, our bank has always actively been involved in that space. Infact, it is leader in that area. We are practically there in most of the power projects and also the roads and ports part. IDBI is involved not only in direct appraisal and financing but also in syndication for the projects. The gaps between sanctions and disbursements are notably long gestation projects. There will always be a phased disbursement because the financial closure itself takes longer than to what would happen to the normal project. After that, the disbursement will take its own time depending upon the phased implementation of the project. Therefore, one would always find a significant amount of undisbursed sanctions for these projects.

Q: On fund infusion specifically, what is the requirement at IDBI? Have you asked the government anything on the anvil in terms of coming to you by way of capital?

Sitaram: As far as requirement is concerned, our capital adequacy for tier one has gone below 7%. From that perspective, we have requested the government for fund infusion especially because the government's holding in IDBI is 52.8%. Since it is less than 53%, we need some headroom in order to tap other sources.

Q: Are you asking for rights offer or just direct infusion of capital by way of new shares? What exactly is the modus of fund infusion?

Sitaram: Structural will be entirely capital government and all options are open. It is upto them to analyze that and select what is preferred for them. We need an infusion of tier one capital and that's what we have asked from the government.

Q: Have you told them about the amount you need?

Sitaram: We have made a plan for about next five years. Based on that, we have given our requirement.

Q: What is the status of the acquisition you spoke about? Can you reveal the name or are you any closer to buying another bank?

Sitaram: I cannot comment on that.