SBI well capitalised; rating cut won't impact local biz: MD

Despite being downgraded by global ratings agency Moody's, Arundathi Bhattacharya, managing director, State Bank of India, doesn't expect any impact on the domestic front. Though external fund raising costs may rise, she says. However, the bank is not planning any such fund raising at the moment, she adds. According to her, the concerns on capital are overdone.

Also Read: Moody's cuts State Bank of India's debt rating to 'Baa3'
On Moody's raising a question mark on the bank's asset quality, Bhattacharya says if the economy turns around then asset quality could improve almost three months from the turnaround, if not then it may go into FY15. Below is the verbatim transcript of Arundathi Bhattacharya's interview on CNBC-TV18 Q: What does it mean to SBI's borrowing cost?
A: At this point of time we expect no impact on the domestic front. On the external front should we go for a medium term note (MTN) raising then we have to take a call as to how the prices work out at that point of time. But we really do not expect any issues at all on the domestic front. Q: But on the external front if you were to go for that MTN that you spoke about, how much might in basis points the cost go up, does it go up 10-20 bps?
A: Actually it will depend upon the time when we go. It is very difficult to predict this at this point of time and at this point of time we are not even considering any such raising therefore it is very difficult for me to quantify it in basis points. Q: Both Moody's and Fitch have actually come out with quite disconcerting views on the asset quality for banks such as yours pointing out that it is not in FY14 but in FY15 when we will actually see some relief on the asset quality front. Do you think it could take that long?
A: It all depends, if the economy turns around then we could see much better asset quality almost three months from when we see the turn. If it doesn’t happen very soon then well yes it could go to FY15. They are projecting FY15 is because of the election in between and they believe during that period the economy would move sideways rather than move up. And that is what they are basing their estimation on. But if that were not to happen and if we see a turnaround then definitely asset quality will begin to improve. Q: What has actually been downgraded is your local currency deposit ratings and yet you say that your MTNs will become expensive.
A: If you read the whole press release it also talks about the foreign currency unsecured. Q: I just wanted to know when you might get capital because the other point they raise is SBI is likely to seek another capital injection from the Indian governor at the end of the fisc, will getting that capital shore up the rating, is capital a problem?
A: Capital is not a problem and we have pointed this out very strongly to the rating agency because if you look at the amount of capital that we have, we are very well capitalized. We are above what has been recommended by basel III, well above it in fact and we are also above whatever has been mandated by our board.
So capital is not an issue for us but somehow the rating agencies believe that because there is a large government holding therefore we have certain dependence on the government for bringing in capital. As I said, we are more than capable of raising capital on our own as well and of course the government has been very supportive and has never yet failed in putting in capital whenever they have been able to and whenever we have required to request for it.
Therefore, this concern on capital is overdone and I don’t believe that this is something that we should be so concerned. Q: Will the second quarter, the current quarter be as bad as the first quarter where you saw almost 20 percent jump in your non-performing loans (NPLs)?
A: At this point, I cannot give you the numbers and we are very close to the quarter end. So I would not like to give you numbers. All that I would like to say is that we are making maximum efforts to see that the kind of slippages that happen are reduced this time and there is a lot of work going on. Last time it was compounded by the retail side of it, retail agriculture and small SMEs. So we have been working very hard in those areas to see that we do better and we will hope going forward that it will be a better number.