Don't expect change in interest rates in RBI policy tomorrow: SBI

Below is the verbatim transcript of interview.

Latha: What is your take on this announcement by the UP government? How much does SBI itself have in terms of exposure to small loans in UP?

A: We are still collecting the data because the scheme contours were not known and our UP operations are controlled by different offices so let us collect the data and get the scheme from RBI.

Latha: You would be what, Rs 5,000 crore at least? I am just taking one-fourth of the total amount.

A: Let us first get the numbers right because unless the scheme is notified by RBI and full details are known, it will be a guess work and I do not want to hazard any guess.

Sonia: In the longer-term though do you think that this could become a big moral hazard because what the government is doing is perhaps inculcating the culture of non-payment of loans to farmers?

A: Banking industry's views are known. I do not think I can add anything further on this subject.

Latha: What is the process? Telangana and Andhra had also announced farm loan waivers and earlier Tamil Nadu, how long do the state governments pay up? Is it really a benefit for the banks that potential non-performing assets (NPAs) are now becoming standard?

A: In the short-term yes.

Latha: But do they pay up? Do the state governments pay up in the same year?

A: Yes.

Latha: So we should expect Rs 36,000 crore to be paid by UP before FY18 runs out?

A: That government has to give the timelines but if that is the scheme then yes the government will foot the bill.

Latha: Usually they pay up is what I am asking because UP is saying they are going to float farm loan bonds, so it looks like a long drawn process and then there will be a problem with their Fiscal Responsibility and Budget Management (FRBM) so you do not worry for those banks, do you? You are expecting the money to come.

A: Yes. That is the loan waiver scheme and it was announced by the central government also, then central government pays and if it is a state government, so I think centre has made clear that state governments have to make arrangements for the funds and that is what I read in the newspaper that they will be raising some bonds and obviously they will have to take care of their FRBM responsibilities.

Sonia: So what percentage of your book on an average comes from agri-loans as a whole and from UP and even if Tamil Nadu goes ahead with it, what could the percentage be?

A: Our post-Budget scenario on agri-book is Rs 2,00,000 crore but not everything is crop loan.

Latha: Monetary policy tomorrow, what are you expecting?

A: Interest rate, I do not think there will be any change. Last time, the policy stance was changed from accommodative to neutral.

Latha: Anything on liquidity?

A: It is plentiful and lot of money is being deployed in the G-secs.

Latha: Is there a fear that they may drain it with some special development fund (SDF) or some other scheme, are you worried that they may do something to liquidity or are you confident they will leave it alone?

A: My guess is that there may not be any change as of now.

Latha: Corporate debt restructuring (CDR), schemes, we have been expecting for the longest time from the government or the RBI, haven’t you?

A: Let us see what comes out.