Don`t see base rate reduction in near future: SBI Chairman

New Delhi: In a free-wheeling chat with Mihir Bhatt of Zee Business, Arundhati Bhattacharya, who took over as the head of the State Bank of India (SBI) in October, shares her views on RBI policy impact, inflation, NPAs, home loans and much more.


SBI has cut home loan rates? Were you waiting for RBI to maintain status quo?

We have reduced spreads and base rates are at the same levels. Liquidity is seemingly good, as a bank, we thought we should increase the home loan portfolio.

High interest rates are creating demand problem for the lenders? Going forward if RBI is not hiking rates, can we see some kind of relaxation in spread or base rates?

I don`t see reduction in base rates in the near future. Base rate reduction is based on cost of deposits, which is again dependent on inflation. But at these levels, inflation does not allow us to reduce cost of deposits which is making it difficult for us to bring down the base rates. Going forward, we will see how our liquidity pans out and how the credit demand is.

Inflation is still a challenge. While RBI has been hiking rates, inflation has been in its own trajectory. Will RBI stance impact the banks and common man?

Rate hikes were meant to keep inflation in control. As per the RBI Governor, data of inflation was not pure, it was lagged. Considering, the data was old, the Governor preferred to wait and watch. Though he is targeting inflation, growth is also his priority. If vegetable prices come down, it will reflect on inflation figures.

Looking at the macro picture, where do we stand on the curve. Is there a possibility of reversal in rates in 2014?

We can expect reversal in rates in 2014. Services component in CPI data which was sticky is now steady. Moreover, if vegetable prices remain steady, CPI will come down.

Do you think this process can start from the first or second quarter when rates peak out?

I don`t know if interest rates will immediately start going back. We feel upward trajectory of interest rates should plateau out.

From SBI`s perspective, how is the scenario panning out in terms of NPAs, credit demand for next year?

Credit demand is much below expectations. Export industries, leather, gems and jewellery are growing strongly and we expect credit growth from these industries. We are also expecting credit growth from food processing industries. Other than that, revival of stalled projects can also drive credit growth. We expect to see a pick up in credit growth by February.

Troubled sectors like mining power, SMEs and real estate--What is your sense in these sectors?

Our exposure in real estate sector is very minimal. SBI has high exposure in power, infrastructure, iron and steel sector. We see progress in the power, infrastructure, iron and steel. In next 3-4 months, stress levels in power sector will go down. RBI norms on infra-financing are very beneficial for banks.

What is the status of the cases in the court, since SBI is the lead banker in Kingfisher loan case we want to know about that?

I do not want to discuss individual accounts. Recovery process is going on from Kingfisher. We will go on with the recovery process of the KFA case too.

The common man feels that when he/she falters to pay an EMI, the bank takes immediately action, whereas corporate customers are treated leniently?

Big units are limited companies, they have limited liabilities. It is easy for banks to recover loans from the corporate customers. Our system enforces us to take action against everybody. As a bank we don’t differentiate between retail and corporate customers. If retail loans look viable, then we try and extend that as well.

We have seen that a SBI Deputy MD was involved in a case of corruption. SBI has given it a clean chit, how do you justify?

Inquiry on Deputy MD has been done on the basis of approval given for the loan. We have given clean chit to him for this loan. We have not found anything wrong with the papers for this loan. CBI still doing investigation in the whole case.

SBI has been trying to merge some of its subsidiaries; will we see anything in the next few months?

We are not thinking about mergers immediately. All our banks needs to be on a stable platform before we go for mergers. We will not consider it till the middle of next year.

Overall what is your sense on NPAs in this fiscal?

We can still see lot of stress on mid-corporate, SME customers. As long as companies are viable, we will definitely restructure loans.

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