SBI's term loan growth outlook not robust: Pratip Chaudhuri

Explaining the rationale, Chaudhuri says in an interview to CNBC-TV18, "In this particular segment 3-5 years we were at 8.75% and all banks including the private sector banks were at 9-9.25%. So, we were hurting ourselves by doing this so that’s why we have corrected."

He also raised concerns that the term loan outflow does not look very robust as 16-19% was the growth target that the bank had set for itself.

Here is an edited transcript of his comments. Also watch the accompanying video.

Q: It’s a recalibration as SBI has pointed out but does it seem likely that over the next few months you may be looking at increases your deposit rates. What kind of impact would that have on the margins for SBI?

A: No not particularly. In this particular segment 3-5 years we were at 8.75% and all banks including the private sector banks were at 9-9.25%. So we thought we are hurting ourselves by doing this so that’s why we have corrected. Post office’s deposit rates are at 8.6% and if you add on the subvention, it adds up to 8.75%.

So we needed to keep some difference and be aligned with the industry. But right now we are not very enthusiastic about deposit growth because the credit growth outflow is not very robust.

Q: Are you planning to increase the other deposit rates on any other tenures. How much will this hike in deposit rates affect the cost of funds and in turn affect your margins?

A: Not particularly because from July 1, the refinance has been increased. So we get another Rs 8000 crore RBI by refinance at 8%. So that takes away any argument for increasing the deposit rates.

Q: I heard you make an important point about how you expect credit growth to be even softer than people estimated earlier. What's your own sense of what a reasonable credit growth target may be now?

A: Around16-19% was the growth target we had kept for ourselves. But now especially the term loan outflow does not look very robust. So if the loan outlook improves then we'll adjust our deposit rates. But right now we are sitting on Rs 40000 crore excess.

Q: Is this softness in credit growth also going to come with some kind of change in your asset quality outlook for the second half of the calendar year or even for the full financial year?

A: Not particularly. It is possibly a reflection on the new projects being taken up for implementation because we are pretty strong in project finance. So, our credit growth bulk of it comes from new projects.

Q: The last time we spoke with you, you indicated that if the RBI cuts rates further then banks may start reducing long term deposit rates. Now that you have decided to hike deposit rates on some tenures do you believe that the RBI may not have the leg room to cut rates even in this policy?

A: No not particularly. It’s a dynamic situation. So whenever RBI has cut the CRR we have given effect to this by cutting our loan rates very significantly and deeply.

So till the CRR cut happens it is a stand still on the interest rate fund except recalibration of some rates. But of course we do take note that the positive bet is happening from the increase in the refinance and to that extent our need for hiking the deposit rates may not be there.

Q: There is a banker’s meet later this week to decide on the fate of Kingfisher Airlines. Is there any loan restructuring package that has been talked about currently?

A: Everything is on the table.