Pay hikes to boost retail loan growth by 17-20%: SBI

The State Bank of India (SBI) on Wednesday said it will be raising long-term capital of USD 1.5 billion by issuing bonds in convertible currency including the dollar. The exercise is a normal one as SBI raises foreign currency funds at regular intervals. The timeline for raising funds is yet to be decided, says VG Kannan, Managing Director of SBI. Discussing the stressed asset situation, Kannan told CNBC-TV18 that the worst is probably over. However, it does not mean that all bad news is done for. With monsoon playing well and implementation of 7th Pay Commission, growth trajectory is coming back in the economy, he says. Pay hikes will boost retail consumption and housing sector both. Kannan expects SBI’s retail growth to be in the range of 17-20 percent on back of pay hikes. While there is also a possibility of a jump in inflation, it will not be substantial. Below is the verbatim transcript of VG Kannan's interview with Anuj Singhal and Sonia Shenoy on CNBC-TV18.Sonia: SBI is raising USD 1.5 billion by issuing bonds. I understand that this is regular debt raising but can you give us a little more details on that by when will you be raising this debt?A: SBI has always been raising this foreign country funds overseas at regular intervals. We are raising from half a billion to USD 1.5 billion over the last so many years and this is one of the regular fund raising activities to enable our foreign offices to fund the assets.The exact timing will be decided and we are looking at the various global scenarios and the Brexit scenario also. May be certain advantages also because we do expect good pricing -- the exact timing is not yet decided. It will be decided in due course.Anuj: A lot of experts believe that the worst of non-performing assets (NPA) cycle is getting over for SBI, would that be right?A: I would say that probably the worst is over and I won't say any bad news is not there but the worst is possibly over. We expect now the monsoon also playing out very well, I think the future should be much better than what we had in the past.Sonia: The other thing we wanted to discuss with you is the 7th Pay Commission hike that was cleared by the cabinet yesterday. What kind of impact do you see on credit growth especially in the retail sector? How much do you think it could improve because of this?A: I should see a good pick up in the retail especially in the housing as also in the retail and that should act as a boost to the economy. So there are certain positives to it. Overall, we expect there should be improvement in demand therefore add to the growth of the Indian economy.Sonia: Can you quantify that for us for SBI particularly, how much do you think retail loan growth could come in at and overall what is the picture for loan growth?A: We have been expecting around 17-20 percent growth at the worst scenario because this is directly a retail demand that is likely to come up. Therefore, 17-18 percent or even 20 percent could not be ruled out.Sonia: Give us an update on the SBI merger, the last time we spoke you guys mentioned to us that by end of FY17 it would be completed, just wanted to know when you would be sending the merger plan to the government and just a status check on that?A: It is work in progress. We are on schedule.