SBBJ may cut deposit rates after RBI policy

State Bank of Bikaner and Jaipur (SBBJ) is planning to revise term deposit rates in case the Reserve Bank of India (RBI) cuts policy rate in the third quarter monetary policy review on January 29.

Shiva Kumar, SBBJ’s managing director, spoke about the bank’s expansion plans and prospective merger with State Bank of India in an interview with Parnika Sokhi and Megha Mandavia. Excerpts:

Did SBBJ stop branch expansion in anticipation of merger with the parent bank?
It did few years back, but now I have changed the strategy. We are opening new branches irrespective of whether merger happens or not. If we don’t grow we will degenerate. In any case, if the merger takes place, the merged bank will have the advantages. In last 12 months we have opened about 100 branches with the 1000th branch inaugurated by finance minister in Jaipur in December. We want to expand in Gujarat and Bihar, where our presence is limited as of now. We will open 100 more branches in the next financial year.

What about overlap in areas where the parent bank is already present?
As of now we are an independent bank and some consolidation will take place after the merger. There is an informal understanding within the group to maintain some distance with each other’s branches to avoid unnecessary competition.

Is SBBJ the best among other associates for a possible merger?
We are ready, but there is nothing on cards as of now. However, we have some amount of private shareholding and seeking their consent will take some time. State Bank of Patiala and State Bank of Hyderabad, which are wholly owned by SBI, have that advantage.

What do you aim to close the current financial year with in terms of business targets?
For the first nine months credit growth has been about 11% and deposit growth 10.5%. We hope to end the year with a 17% annual growth in advances and a 16.5% growth in deposits. We aim to maintain the current account savings account ratio around 37%. NIMs (net interest margins) may come down to 3.7% from 3.9% in last quarter since we have lowered our base rate by 25 bps in October and deposit rates are still high.

Any plans to revise interest rates on loans and deposits before the upcoming RBI policy?
We will wait for the central bank to announce its decision. If there is an easing of 25 bps or more, we will reduce deposit rates. It will be across tenures.

How much additional capital does SBBJ need to sustain current growth trend?
We are comfortable with current capital adequacy ratio of 12.81% and Tier I at 9%. So there should be no problem under Basel-III norms. We will need about Rs3,000 crore of additional capital in the next five years.