It will be very difficult for the bank to push margins up in a significant manner in the current scenario where credit growth is muted, Kumar said on an earnings call on August 2.
State Bank of India (SBI) Chairman Rajnish Kumar expects limited improvement of the bank's net interest margins (NIMs) this financial year on the back of muted credit growth and a lack of room for further reduction in the cost of funds.
It will be very difficult for the bank to push margins up in a significant manner in the current scenario where credit growth is muted, Kumar said on an earnings call on August 2. He added that while there could be some change in term deposit rates, the lender has done whatever it could in terms of bringing down the cost of funds.
From August 1, SBI announced sharp cut in fixed deposit rates across tenors. This will lead to lower lending rates going ahead.
There could be some respite for margins from the claw back on account of the reclassification of bad loans from the agriculture segment and higher risk premiums, he said."Bank is much more careful on risk premiums now, concessions are fewer," Kumar said, adding that the upside impact may not be more than 6-10 basis points. He expects NIMs to be at 3.1 percent by March 2020.
In April-June quarter, the bank's NIMs stood at 3.01 percent, as compared to 2.95 percent in the same period last financial year.
In terms of credit growth, SBI expects to expand its loan book by 12 percent this financial year. Kumar said that the bank is seeing the project pipeline in sectors like oil and gas, renewable energy and roads. Also, loan growth will likely be supported by public sector undertakings this year.
SBI clocked a domestic credit growth of 11.89 percent in the first quarter of current financial year. Kumar expects loan growth to pick up in the second half of the year.
On the asset quality front, SBI aims to contain its slippage ratio below 2 percent by March 2020. The bank's slippage ratio rose to 2.83 percent in the June-ended quarter, up from 1.95 percent in the same period last year.The Great Diwali Discount!
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