A Krishna Kumar, MD of State Bank of India says the country’s largest public sector bank has started an investigative audit on the allegations of wrongdoing levied by online portal Cobrapost. Kumar expects to complete the internal inquires by next month.
A Krishna Kumar, MD of State Bank of India (SBI) says the country’s largest public sector bank has started an investigative audit on the allegations of wrongdoing levied by online portal Cobrapost. Kumar expects to complete the internal inquires by next month.
"We have zero tolerance for money laundering," he told CNBC-TV18 in an interview.
In a sting operation in March this year, Cobrapost had showed how private banks like HDFC Bank, ICICI Bank and Axis Bank were helping their customers convert black money into white.
In its latest expose, Red Spider 2, Cobrapost has revealed that the money laundering racket is happening at a much larger scale with top state-owned banks and insurance companies being part of it.
Life Insurance Corporation, State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, Tata AIG, Dhanlaxmi Bank, Indian Bank, IDBI Bank, Yes Bank, Federal Bank, Reliance Capital, Birla Sunlife are among those named by Cobrapost in the scam.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: What is SBI’s response to the allegations that were made yesterday and have you begun to conduct internal enquiries of your own regarding the allegations that they have made of money laundering?
A: After yesterday’s reporting on the Cobrapost, we have immediately started an investigative audit in these five instances they have quoted. I would like to add that we in the bank have a policy of zero tolerance for such incidents taking place.
We will take stringent action if anything is proved that the people at the branches are doing something, which is not correct or which is not within the regulations. All I can say is that we are extremely aware that we in the bank are not supposed to do such activities that are not legally permissible.
Q: Specifically with regards to this know-your-customer (KYC) norm issue though, would you say that there is need for greater introspection either in terms of what the KYC norms demand or would you say it is difficult for most banks to meet the kind of specifications that are set down which leads to these loopholes developing perhaps?
A: I think the issue is not all about KYC. I think the KYC norms are fairly simple to follow. I do not believe there is any great problem in adhering to the KYC norms. The issue could be that if there are accounts which are 10 years old, some of the KYC documents may not have been in existence 10 years ago, so getting those documents is always a matter of contacting the depositor and getting that particular document. But KYC per se is not an issue at all.
Q: When do you think you will be able to complete these investigations and inquiries and by when do you think either the finance ministry or the Reserve Bank of India (RBI) will be able to take any kind of appropriate action regarding this issue?
A: I do not know when they will be able to do it but we on our part will be completing this inquiry maybe within the month or so and take appropriate action. If people are found to be guilty of violating certain procedures, they will be dealt with very strictly.
Q: Just to shift focus to another issue that has been concerning the street, the Supreme Court (SC) is hearing a petition seeking a cancellation of about 194 captive coal blocks. Can you give me any indication of what kind of exposure SBI has to couple of these captive power projects and if indeed this cancellation comes through, what could the impact be?
A: I am not very sure of those numbers right now but I did discuss this point recently with the department concerned. They feel that the impact on SBI will be minimal but I do not have the immediate numbers with me at the present moment.
Q: At this point though, being the largest bank in the country, where would you say you are still seeing signs of stress in terms of lending? Is it from the small and medium enterprise (SME) segment, is it from some of these infrastructure pockets such as coal or other infrastructure spaces or is it individual cases such as the Kingfisher case which had erupted a couple of quarters back?
A: I believe the stress is still quite a lot on the SME sector especially the larger SME or the mid-corporate; they are sort of fungible in terms of definition. That is why the stresses are still visible. Going ahead, probably they should ease out in the next couple of quarters or so.
Individual cases like you mentioned would always happen and that is the different reaction or a different set of measures to be taken to handle them. In general it is the large SME and the mid-corporate where the stresses are still not out of the system.
Q: Is any of that or is the large part of that a function of what is happening with rates per se because SBI was quite categorical about the fact that they were not keen on lowering rates even if the RBI came in with the repo rate cut and that indeed has not come through from the bank, is it a rate issue or is it something else?
A: No, I do not believe it is a rate issue because we have one of the lowest rates of interest in the market right now. I do not believe that the rates of interest are something which is very critical for credit quality or credit off take. It is probably the sense of the general economy which we need to look at.
Q: What did you make of the policy itself, will there be any transmission of rates into the system and what do you expect to see from the next policy after the hawkish tone that the governor threw up in this one?
A: Our chairman was on record saying that with the last 25 bps reduction in the repo there was hardly any scope for passing on interest rate reduction. As to what goes ahead, I could only hope that there is further reduction in the repo rates and more specifically in the cash reserve ratio (CRR) as we go ahead.
Q: The observation seems to be that the RBI has more or less spent its fire power in terms of the long line of rate cuts we have seen through the course of the last few months, are you getting the sense being one of the biggest bankers in the country lending to a lot of these sensitive sectors that there is some kind of recovery happening in the second half of the year or is it still looking extremely nascent, extremely brittle?
A: No, I do not think so. For the year ending March 2013, we had credit of growth year-on-year (Y-o-Y) of about 21 percent or so. Even today if you look at the Y-o-Y growth in credit, it is still around 18-19 percent. So, I do not believe there has been a reduction in the pace of credit offtake. It is probably just that new projects are not coming in with the rapidity they should.
SBI stock price
On December 10, 2014, State Bank of India closed at Rs 307.05, up Rs 5.00, or 1.66 percent. The 52-week high of the share was Rs 2977.85 and the 52-week low was Rs 287.20.
The company's trailing 12-month (TTM) EPS was at Rs 15.70 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 19.56. The latest book value of the company is Rs 158.43 per share. At current value, the price-to-book value of the company is 1.94.
READ MORE ON State Bank of India, Red Spider 2, Cobrapost, know-your-customer (KYC) norm, Reserve Bank of India (RBI, Supreme Court (SC), small and medium enterprise (SME), Kingfisher, hawkish tone, cash reserve ratio (CRR), interest rate reduction, repo rates
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