SBI Seeing Rise In Retail Loans, Greater Corporate Loan Inquiries, CFO Says
State Bank of India has been able to transmit nearly 100 percent of repo rate cuts this year, CFO Prashant Kumar says.
In a sign of stability, India’s largest public sector lender is seeing a rise in retail loans and an increase in inquiries for corporate loans.
That’s according to Prashant Kumar, deputy managing director and chief financial officer at State Bank of India, who said the bank saw greater stability in October and November.
“Initial viewpoint was that it’s because of the festival season, maybe some of the offers have been given by different corporates. But now we are seeing, when we talk to customers and large corporates, the feedback is that things have stabilised and are now moving in an upward direction,” Kumar told BloombergQuint in an interview.
There is an “actual pickup” in retail loans, Kumar said. On the corporate side, it’s about utilising existing capacities and a number of proposals are in the pipeline, he added.
India’s financial system has been under strain, due to persistent non-performing assets and rise in number of frauds and insolvency cases. The defaults by IL&FS Group companies in September last year led to a liquidity crunch.
But the banking system is now flush with liquidity, Kumar said.
Speaking about monetary policy transmission, Kumar said that SBI has been able to transmit nearly 100 percent of repo rate cuts effected by India’s Monetary Policy Committee this year. On Monday, SBI reduced its Marginal Cost of Funds-based Lending Rate, or MCLR, by 10 basis points.
“RBI has reduced (the repo rate) by 135 basis points so far and we have reduced (MCLR by) 65 basis points, so it is more or less inline with our composition of deposits,” Kumar said. A reduction in repo rate does not apply to the lender’s CASA deposits, which constitute 45 percent of SBI’s loan book.
“Any further reduction in the deposit rate would be detrimental to their interest. So we are very, very careful about deciding any further reduction in interest rates on deposits. And if we are not able to do that, a further reduction on MCLR would be a difficult choice,” he said.
Other key highlights from the interview:
- Rumour of a weaker bank being merged with SBI not true, just gossip.
- The function of reduction on the MCLR depends on how much we will be able to reduce on the deposits.
- Will take a call next month if there is any case to reduce rates on the deposit side.
- Our decision of not reducing interest rates on deposits is in no way connected to the interest rates on small savings, it’s about protecting depositors’ interests.
- “Essar resolution should happen in this quarter, by the grace of God.”
- For large insolvencies, the issue is more about getting immunity to buyers of those assets.
- For SBI, the payout from resolution of three big insolvency cases would be about Rs 18,000 crore.
WATCH | SBI CFO Prashant Kumar On MCLR And Repo Rate Cuts