Speaking to CNBC-TV18 Arundhati Bhattacharya State Bank of India Chairman said the lender had seen transactions of around Rs 1 lakh crore transactions on Sunday. Out of which 80 percent is deposits, she said.
Definitely, people are becoming more comfortable and less panic stricken, she said, referring to the ban on Rs 500 and Rs 1000 notes.
She also observed that though deposits are increasingly coming down, withdrawals are going up. After the dust settles, some amount will remain in the banking system, she expressed hope, adding that deposit rates will come down.
Regarding buying government bonds, she said that most deposits are coming in the savings account. “I do think this will be a problem of plenty on the liability side.”Below is the verbatim transcript of Arundhati Bhattacharya’s interview to Latha Venkatesh.
Q: How much money has been collected in deposits so far?
A: We have done transactions around Rs 1 lakh crore of which around 80-82 percent is deposits. Of course, we have exchange which will be around Rs 7,000 crore, withdrawals and ATM withdrawals plus the cash deposit machine (CDM) deposit of cash, so basically, around Rs 1 lakh crore till yesterday midnight. Today’s numbers I still don’t have, I have hourly numbers but there is no point in giving those. I think it is about that.Q: Are you getting a sense that the panic is receding, I mean we are now three-four days into it, today is a holiday in Mumbai but is it that people are now not panicky? Are lines getting smaller in your bank branches?
A: Yesterday was a Sunday and therefore we did anticipated bigger crowds for those people who work six days a week and they have only Sunday. However, even then the numbers of transactions we did were 10 percent lower than on Saturday. Today, if you compare the Southern states, which are open, 25 percent transactions are lower and this is only for the Southern states, I am not taking the closed states. So, definitely people are becoming a little more comfortable and less panic stricken that they will not get the money.
Q: On Saturday the Reserve Bank of India (RBI) put out a notice saying that they have asked for daily reports from the banks and they are closely watching patterns. Is this something that they will watch as to sudden swelling of accounts will all be monitored?
A: Yes, I should definitely think so. There is a concern that there could be what is called as money mules and definitely I think they will look out for the same. We ourselves do a lot of analysis of patterns. At this point of time the data is still too small and for a very few days, but definitely I think this will be something that will be done by RBI.
Q: We were given some rough numbers from RBI sources, not officials that about 60 percent of the Rs 1,000 notes and 30 percent of the Rs 500 notes were not circulating. So, they had a sense it was hoarded. That is about Rs 6.5 lakh crore. Are you privy to better numbers than this is, so Rs 6.5 lakh crore have to come back to the system?
A: I am really not privy to these sorts of numbers. I won’t be able to give you ant light on that.
Q: The other part is that you are going to get, like you said already Rs 1 lakh crore nearly or Rs 82,000 crore of deposits. How do you see interest rates moving? By the end of December 30th you will be able to crash deposits rates to 5 percent?
A: The only think is how much of this deposit is going to be stable. It is coming in surely, but what I also observed is that every day the amount of deposit is coming down and the amount of withdrawal is going up. So, people who have actually deposited will also be taking out money. So, we have to wait for little more time to understand what will be the pattern of these deposits.
However, having said that some amount will definitely remain in the banking system. Therefore, definitely rates will come down in the deposits and today because the marginal cost of lending rate (MCLR) is so tightly spliced to the deposits rates it is absolutely likely that borrowal rates will also come down.
Q: Initially, you may have a problem with margins, isn’t it, so much cash and no one borrowing, you had to put it in government securities (Gsec)?
A: That is absolutely correct, thankfully most of the deposits is coming in the saving accounts, so to that extent it is a little better. However, still all the same I do think that this will be a problem of a plenty on the liability side.
Q: What about problem of nonperforming loans (NPLs) as well because business at a very vulnerable level has come to a stop. The bigger boys will always be managing with electronic, do you think that also will be something you will worry about after this money changing is all over?
A: It is very difficult to state because a lot of people are telling me business is going to show huge volumes, because they are going to put all the stuff that they were not accounting into the business itself. So, business actually may end up showing very large volumes this year, very difficult to state at this point of time.
Q: That may be true perhaps in January- March quarter, but right now when you go to restaurants or you go to malls there is practically nobody or may be a very small percentage, so in the more vulnerable segments like probably wholesalers, perishable goods dealers, overall are you expecting a problem with small and medium enterprises (SME), micro, small and medium enterprises (MSME) guys?
A: The problem was there in first two or three days. I think subsequent to that people have got around it. Frankly, I don’t see anybody in restaurants who doesn’t have a card or any restaurants that doesn’t have a posh machine. So, I see no reason why restaurants shouldn’t do business. Only reason could be people are panicked, so they are either in the bank or at home wondering what to do, some people may be very distort, all kinds of things might be there but other than that there is no reason why restaurants should be empty.
I think over a period of time this will normalise. The first two days I do know that there were a lot of people who drew money but they hoarded it. They wouldn’t go and spend it in the market even though they needed something. Third day, fourth day they can’t hold out any more, so people are back in the market. While coming to this place itself I was watching the footpaths where you have these veggies, there was brisk trade going on over there. So, I don’t think at any point of time everything will come to a standstill; for a little while yes, but not for longer period of time.
Q: Was it a tactical error to have not put Rs 500 notes first, I mean Rs 2,000 is not a note in which you do transactions. Those who do Rs 2,000 transactions invariably will use the card. Was that a tactical error?
A: For a little while they did not want these denominations in the market because these are the denominations that were being taken out, so they wanted to understand what is coming in so there is no mixing of denominations with new and old. I think that was the concept, but obviously people also realised that there is too much of a gap between Rs 100 and Rs 2,000 and therefore that Rs 500 has to come in.
As I told you yesterday the first Rs 500 were received by us. We have already started disbursing in Bhopal; tomorrow we may start in Mumbai, so Rs 500 will come back in.Q: You have almost been an evangelist in telling people to use digital. Mobile Personal Identification Number (MPIN), one hopes that becomes easy, the unified payments interface (UPI). What is State Bank and in fact the banking sector doing. Are you all educating the tax drivers union, or the vegetable vendors union that you can actually take money from your customer through SMS?
A: Absolutely, we are doing that in fact we have approached the Kaali-Peeli Taxi Association and their union leaders have given a call to all the kaali-peeli cabs to take on Buddy as a wallet. We are doing the same with veggie vendors and showing them how the wallet is done. In case they are uncomfortable with it we are also coming out with a much liberalised scheme for giving posh machines to the veggie vendors. All of that is in the works. I think in the next one month or so you will see a proliferation of these various ways of paying money.
Also on UPI, we were late comers as you but on the very first day on UPI we did 15,000 transactions which is three times, what was being done on a daily basis, by all the other banks put together. We are big in digital and I think it is time people realise. They must use digital otherwise this country will go back to the same ways and unaccounted cash will go back again. If everybody is crying about taxes whether indirect or direct, we have to understand if everybody is paying taxes, the tax rate will fall. Unless everybody is doing it, it will not happen.
Q: When do you think the ATM machines in far-flung areas or even for that matter in cities will start showing the older patterns of just 4-5 people in the queue. Do you think this happens in a week, I mean since you have your finger on the pulse of the depositor, so to speak, shall we see through this or through November or will be see it even go all the way to December.
A: Through November should be enough because at this point of time our idea is that we do from day after tomorrow about Rs 3,000 machines per day which is on the lower side. I am being very conservative; we will try to do more. If that is the case, we should be through by in November, but even before that we are working on very innovative kind of solutions which will enable people to actually draw notes even if that ATM is still not recalibrated.
As you know during the Chennai floods we had people going with a posh machine in boats delivering cash to the houses. We will try and bring about those kinds of innovative ideas here to ensure that in the far-flung areas where the recalibration will take time, we take these innovative ideas to them and actually deliver cash.
One small story I must say, some of my people told me the other day that locals are supplying them with food and snacks because they are not able to get up and go and eat. So, the locals actually have come in and the ladies have been helping out by giving them food and snacks and we are really touched. We are touched by the kind of help we are getting from our customers by the kind of patience that they are displaying and they have been wonderful.
I will say 99.9 percent of customers have been absolutely wonderful and I need to thank them on behalf of the bankers for the patience they have shown. My only request again to them is please if you have an ATM debit card don’t use it only on the ATM use it on the posh, make more of these transaction digital, so that India actually has less of unaccounted cash.
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