Future lies in mobile banking, says SBI

State Bank of India, or SBI, is set to get a capital infusion of Rs4,500-8,000 crore by March, the government announced on Thursday. Together with surpluses earned during the year, this infusion — though less than the Rs20,000 crore the bank has been seeking — will help boost its Tier-I capital to 9%, well above the RBI mandated 8% threshold and up from 7.6% at the end of June.

This removes a big overhang on the country’s largest lender — in fact, ratings agency Moody’s last week downgraded SBI’s standalone rating to D+ from C- on a scale of A to E, citing low Tier I capital, its recent failure to raise capital and worsening asset quality — which is otherwise geared to take the challenges head on.

A Krishna Kumar, managing director and group executive (national banking), State Bank of India spoke to Vishwanath Nair and Neelasri Barman on the issues at hand and the steps being taken to tackle them. Edited excerpts:

What do you feel will drive credit growth for SBI?
Credit growth will come from the retail segment and the small and medium enterprises (SME) segment, though agriculture and rural sector will also be there. I am not as sure about large and medium scale industries as they are impacted by the overall condition of the economy. In the retail segment, credit growth will be there in housing and auto loans. We expect better offtake of the schemes we have launched in the retail segment. In the home loans and car loans segments, we expect a growth of 18-20% year on year.

Has there been a pick-up in home loans?
Home loans have grown over the last six months, though it is less than the comparative period last year. It is slower than what we had expected. In the beginning of the year, we had expected to grow roughly around 20%, but it’s not as much as that; maybe we’ll see around 16-18% growth.

What kind of growth are you seeing in personal loans?
The personal loans segment is growing, but we have to be a bit more careful here and make sure these loans are repaid. As far as pushing those loans are concerned, we have tie-ups with various corporates to whose employees we give these loans.

What is the composition of your non-performing assets (NPAs)?
It is evenly distributed in terms of absolute numbers across all the segments. It includes large and medium industries, small and medium enterprises, retail and agriculture. But if you see, percentage wise, agriculture has the largest share.

How is SBI tackling the NPA challenge?
In the last few months, we have done a number of things. One, we have set up account tracking centres across various states where we have a number of people who will use the contact details available to call the borrowers and remind them that their account is about to become irregular if they do not pay up. So far, from the quick analysis we have done, we have been able to contact about half the borrowers as some phone numbers need to be updated. From those who we are able to contact, 60-70% pay up. It is purely done within the bank, not like a call centre business which we outsource. This mainly targets the individual customers, though we are trying to extend it to smaller enterprises. We are also trying to see if we can do this for the slightly larger agricultural loans. In the rural areas, we have created rural recovery teams.

These teams have 3-4 people each, depending on the work available and their job is to go to each borrower in the villages and tell them that their loan has become irregular. The pilot was a great success in Punjab and Chandigarh in May this year. It’s the same concept we are now extending across the country. We will not do anything illegal, which includes engaging outside agencies. We do everything as per the law and as per the rules.

The deadline to the provision coverage ratio (PCR) mandated by the RBI was in September. Were you able to meet it?
We will be able to meet it for sure. It is not just the PCR norm anymore, I think that has already been indicated. Earlier this year, the RBI had said that we are not looking at the 70% coverage on a dynamic basis. What they had indicated was, whatever your NPAs on September 30, 2010, you should have 70% for those NPAs. So, to meet that backlog of provisions, so to speak, we had to provide almost Rs500 crore in the quarter ending September, which we will be doing.

Do you have initiatives like mobile vans for financial inclusion?
We have done this in Madhya Pradesh where a mobile van manages a few villages. We are planning to do this massively in other places in the next couple of months. Such vans can cover 12-15 villages in a week. The only constraint is the condition of the roads. In fact, in one case, the van overturned because there was no road.

What is your recruitment target for this fiscal?
We are looking at roughly 4,000-5,000, including officers and clerical staff.

Every banker dreams of being able to introduce an initiative that no one has done before, when he or she gets to the helm. What is your dream?
I am too much of a practical person, so I look at it from what can be done. But having said that, I feel we need to do something more in the space of mobile banking. We need to make it much more popular than it is right now because that is the banking of the future. Mobile banking might have failed to take off and this is not because of lack of systems and procedures. Those things are in place. It is just that the general public is not very convinced about mobile banking. Bankers have to play a major role in popularising this. Otherwise, the future of banking will bypass India. I think, going forward, mobile banking will be more preferred than internet banking.