SBI not worried about unsecured loans, says Dinesh Khara

Khara said that so far in the second half of the financial year (FY) 2023-24, retail loans have seen an uptick.

The State Bank of India (SBI) has nothing to worry about its unsecured loans which remain under control, chairman Dinesh Khara has said, a few weeks after the Reserve Bank of India tightened norms for credit cards and personal loans.

The total unsecured loans of India’s largest bank were at Rs 2 lakh crore against the total book size of Rs 35 lakh crore, Khara told CNBC-TV18 on January 4. This is 5.7 percent of the total loan book of the lender.

“We have no concern on asset quality with respect to unsecured book,” Khara said. He also said that cost of funds has increased by five basis points (bps) due to higher risk weight assets for unsecured loans and non-banking financial companies (NBFCs).

Also read: RBI increases risk weight by 25% on consumer credit exposure of banks, NBFCs

The central bank on November 16 said that it has increased risk weight by 25 percent on consumer credit exposure of commercial banks and non-banking finance companies (NBFCs). The increase in the risk weights of consumer credit exposure of commercial banks (outstanding as well as new), includes personal loans, but excludes housing loans, education loans, vehicle loans and loans secured by gold and gold jewellery, RBI said.

One basis point is one-hundredth of a percentage point.

Khara said the RBI move seemed aimed at securing healthy growth. “The RBI wants to ensure that the system doesn't get overheated,” he said.

The SBI chairman said the industry should grow at 14-16 percent and corporate credit was expected to grow as well. “We expect growth in corporate and small and medium enterprises (SME) credit. We also see healthy growth in real estate mortgage loans,” Khara said.

Also read: SBI garners $1 billion from overseas to cater to ESG financing market

Khara said in the second half of the financial year 2023-24, retail loans were seeing an uptick and the rural economy would pick up in the near future.

There have been concerns about rural economic growth that has been sputtering for a while.

Khara also said the none of bank’s subsidiaries would list on the exchanges over the next 12 months.