Mumbai: The country’s largest lender, State Bank of India (SBI), does not seem perturbed over the unprecedented liquidity crunch that has hit the banking system and forced the regulator, the Reserve Bank of India (RBI), to release Rs1 trillion through a cut in banks’ cash reserve ratio, or the money that commercial banks are required to keep with RBI and pare policy rate.
According to banking analysts, SBI’s loan book in the past one year to September has grown more than 31% against the industry average of about 25% and deposits by 23% against about 20% of the industry.
Shouldering responsibility: SBI’s O.P. Bhatt says his bank would walk an extra mile to help out industries, particularly SMEs and those who have been its customers for some time and are going through a downturn. Ashesh Shah / Mint
SBI chairman O.P. Bhatt declined to comment on such issues ahead of the bank’s July-September quarter earnings next week, but said barring a temporary liquidity crunch for two days in October, it has been business as usual for SBI.
In an interview on Saturday, Bhatt said the bank has not blacklisted any industrial sector and is willing to give loans to real estate firms as well as airlines, provided right collaterals are offered.
He admitted that SBI may accumulate some non-performing assets (NPAs) when the economy slows, but it will walk an extra mile to accommodate its borrowers and help them tide over the crisis. Edited excerpts:
It seems that you have stopped lending because you don’t have any money.
This is not correct. We are lending to corporates as well as retail borrowers.
One of your borrowers early this month said your officers were offering all sorts of excuses not to give money.
We had some liquidity problem for two days in October and those two days we told our very large customers, who wanted over Rs500 crore, to wait for things to settle down. Things are normal now and we have excess cash. So, we are not holding on (to) any disbursements. You can check with my consumers.
Haven’t you stopped lending to the real estate sector?
Not at all. You must know what is happening in that sector. With the land and property prices going down, value of the collaterals that these firms offer to us is also going down. Naturally, we are asking for either more collaterals, or cutting down the limit to what extent we can lend to them. This is natural.
We have to do our business and we cannot afford to compromise on our credit norms.
What about airlines?
What about them? We are giving loans to airlines. We have offered facilities to Nacil (National Aviation Co. of India Ltd) that runs Air India. We are also considering facilities for Jet Airways and Kingfisher Airlines. Both the firms have approached us. Why should we deny loans to them?
But aren’t these firms in a bad shape? Can they repay?
You should not expect my bank to go belly up by giving loans to unviable businesses. The airlines industry is going through a bad patch. We are asking for the right kind of collaterals.
For instance, we can securitize their receivables. We can have a charge on their aircraft. We may also ask for pledging of the shares of such companies.
So, you have not blacklisted any sector or banned loans?
On the contrary, I am asking my people to be considerate and be a bit extra accommodative on a case-by-case basis for those industries which are going through a downturn, particularly the small and medium enterprises and those who have been our customers for sometime.
We will walk an extra mile to help them out. Being the country’s largest bank, we have some responsibility.
How much money you plan to give to Jet Airways and Kingfisher?
I cannot discuss individual accounts with you. All I can say that it is not a very big amount and they are working capital loans.
Was there pressure from political quarters for such loans?
Not at all.
So, there is no liquidity problem?
Absolutely no. We have extra government bond holdings worth at least Rs20,000 crore, which can be used as collateral to get money from RBI.
If you take into account the oil bonds and RBI’s recent decision to allow banks to hold on 24% SLR (statutory liquidity ratio) securities instead of 25% of their total deposits, we have a headroom for about Rs40,000 crore.
Sometime back, we started a new deposit scheme, offering 10.5% on 1,000-day deposits. There has been tremendous response to that.
Being a public sector bank, you must be enjoying a lot of trust.
Yes, that’s our advantage. There is a spurt in our deposit mobilization and you can probably attribute some of it to flight to safety.
We have probably grown our deposits, particularly, savings and current accounts, more than the industry average last quarter.
I can’t discuss the numbers. We will announce our quarterly earnings next week.
What about advances? Will your profitability be hurt?
I can’t discuss these. All I can say that we are not impacted by the turmoil.
What about your global business? Isn’t there a liquidity crunch with foreign money lines drying up?
Not at all. We are monitoring on a daily basis and we are cash surplus on a daily basis for our overseas business.
Any plan for an overseas bond issue on the lines of the India Millennium Deposit?
There is no such plan. We are seeing good flow of NRI (non-resident Indians) deposits. If we need more NRI money, the authorities could allow us to raise five-year CDs (certificate of deposits) and that will serve the purpose.
The maximum maturity of NRI deposits is now three years.
Are NPAs going up?
I can’t talk about numbers ahead of our results. It’s natural that NPAs might go up slightly when the economic environment is worsening, but we are closely monitoring all developments and it cannot go up substantially.
Are you going slow on retail loans?
Not at all. In fact, our home loans and car loans have been growing at a very high rate—more than 25% year-on-year.
Our education loan portfolio is also growing very strongly. The overall retail portfolio of the bank is around Rs1 trillion now—about 15% of our total assets, and we have no plan to go slow on such loans.
The only segment where we are going slow is clean personal loans, where we do not ask for any collaterals.