What are your top priorities?
First is risk management. The assistant who sits at the counter must understand the risk that the bank could face if the job is not properly executed. So, we have started training personnel so that they know their responsibilities better. If you leave out the stressed assets problem, the next biggest issue is giving uniform and excellent customer service. We are getting an assessment done on the status of customer service across all channels.
I am spending maximum time on resolving the issue of non-performing assets, improving productivity and exploring ways to strengthen SBI’s information technology. Ultimately, a lot depends on the collaboration within the bank and the group. I wish I had 48 hours in a day!
How was 2013 for SBI? And what are your expectations from the New Year?
It was a tough year for the bank since we reflect the economy. Corporate credit demand took a hit with most advances deployed in refinancing rather than new projects. Accordingly, profitability was also impaired, assets are stressed and high volatility earlier this year increased the cost of funds.
The year 2013 was peculiar in a way. Neither the treasury nor the loan book performed as per expectation. Normally, when the interest rates fall, treasury gives good returns and when interest rates rise, the loan book gives good returns.
I hope that in 2014, credit growth may pick up mostly driven by demand from the agriculture sector, exports and clearance of infrastructure projects. We will launch a number of new products in the agriculture segment to tap good credit demand.
Is there a possibility of reversal in interest rates in 2014?
We can expect reversal in rates in 2014. The services component in the Consumer Price Index (CPI) or retail inflation data, which was sticky, has stabilised. It depends upon how inflation pans out. If vegetable prices remain steady, the CPI will come down.
Do you think this process can start from the first or second quarter when rates peak out?
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 and credit demand for the next year?
Credit demand is much below the expectation. We expect credit demand from export-related industries like leather, gems and jewellery. We are also expecting credit growth from the food processing industry since agriculture output is good. Revival of stalled projects can also drive credit growth. Come February, we expect to see a pick-up in credit growth.
What about troubled sectors like mining, power, SMEs (small and medium enterprises) and real estate?
Our exposure in real estate is very minimal. SBI has high exposure in the power, infrastructure, iron and steel sectors. In the next three months, the stress levels in the power sector may go down. The RBI norms on infra financing are very beneficial for banks.
There is a feeling that banks take immediate action against individuals faltering on EMI (equated monthly instalments) repayments, while the approach is lenient towards corporate clients…
Big units are limited companies, they have limited liabilities. It is easy for banks to recover loans from 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 also look viable, then we try and extend them as well.
An SBI Deputy MD was involved in a case of corruption. SBI has given him a clean chit. How do you justify?
Inquiry on the Deputy MD concerned was done on the basis of approval given for a loan. We have given clean chit to him for this loan since we did not find anything wrong with the papers for this loan. The CBI (Central Bureau of Investigation) is still investigating.
SBI has cut home loan rates after the latest RBI monetary policy review. Were you waiting for the RBI to maintain status quo?
We have reduced spreads, base rates are the same levels. We thought liquidity is good As a bank, we thought we should increase our home loan portfolio.
High interest rates are creating demand problem for the lenders. Going forward, if the RBI does not hike rates, then can we see some kind of relaxation in your spread or base rates?
I don’t see any reduction in the base rate in the near future. The base rate reduction is based on cost of deposits, and the cost of deposits is dependent on inflation. And inflation at these levels does not allow us to reduce the cost of deposits. If the cost of deposits is not reduced, it is difficult for us to bring down the base rates. It’s difficult for us at this point in time to reduce base rate. Going forward, we will see how our liquidity pans out and how the credit demand is.
Inflation is still a challenge. The RBI has been hiking rates and inflation has been on its own trajectory. Will this impact banks and the common man?
Rate hikes were to keep inflation under control. As per the RBI governor, data of inflation was not pure, data was lagged. If vegetable prices are coming down, it would reflect in inflation figures.
Considering that the data was old, the RBI governor preferred to wait and watch. He is targeting inflation but growth is also his priority.
Since the SBI is the lead banker in the Kingfisher Airlines loan case, what is the status?
I do not want to discuss individual accounts. The process of recovery from Kingfisher is going on.
SBI has been try to merge some of its subsidiaries. Will we see anything on this front in the next few months?
We aren’t thinking about immediate mergers. All our banks needs to be on a stable platform before we go in for mergers. We won’t consider mergers till the middle of 2014.
What is your sense regarding NPAs this fiscal?
We can still see a lot of stress on mid-corporate and SMEs customers. As long as companies are viable, we will definitely restructure loans.