Since the Reserve Bank of India (RBI)‘s announcement to withdraw ₹2,000 currency notes from circulation starting May 23, India’s largest bank State Bank of India (SBI) has so far received ₹14,000 crore worth of ₹2,000 currency notes as deposits, while ₹3,000 crore worth of these notes have been exchanged.
On the sidelines of SBI’s foreign currency bonds listing ceremony at GIFT-IFSC, Dinesh Khara, Chairman, SBI said, “Around ₹14,000 crore worth of ₹2,000 currency notes have come into the accounts as deposits, while notes worth ₹3,000 crore were exchanged through the branch network. Generally, we are about 20 per cent of the market.”
He also noted that as the withdrawn currency note of ₹2,000 continues to be a legal tender and there was a “fairly wide window given for exchange” that took away the anxiety from the mind of the people.
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Rate-hike pause
Commenting on the interest rate cycle outlook, Khara expressed optimism that the banking regulator RBI will maintain a pause for the key rates.
“There was a pause from the RBI and also the inflation numbers that we have seen, we expect that the pause should continue. We have to keep a watch on global scenarios and RBI will also look into multiple data points before taking a final call. But as of now, we believe the RBI should continue the pause.”
Resolution through NARCL
On the bad loans of the bank, Khara noted that the bank has identified a few high-value accounts to be transferred to the National Asset Reconstruction Company Ltd (NARCL) — a bad bank created by the Centre to clean up the stressed assets in the banking system.
“For the fiscal 2024, we have not set the target as such but we have identified a few accounts, which would be transferred to NARCL,” he said, adding that the total bad loan amount has come down following the resolutions through OTS and NCLT. “The quotes that we get from various ARCs are more meaningful. That’s a big benefit of NARCL, which is also acting as a catalyst.” he added.
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Earlier reports indicated that a phased-approach was adopted to resolve the bad loans. In the first phase, some 15 accounts aggregating to ₹50,335 crore were identified to be transferred to NARCL during the fiscal 2022.
At the listing of $750 million bonds at India INX under its $10 billion global medium notes (GMTN) programme, Khara commented that against the $750 million intended to be raised, the lender had received investor interests worth $3 billion.
“The success of the issue highlights the strong investor base that SBI has created for itself in the offshore capital markets. The issuance received huge participation from several marquee accounts across geographies resulting in the largest spread compression amongst all the dollar-Indian bonds issuance during the current year,” he said.
Commenting on the listing, Sundararaman Ramamurthy, MD & CEO, BSE Ltd, said, “The aggregate MTNs established on India INX platform since its launch in 2018 is worth over $72 billion and listing of bonds aggregate to around $52 billion.”
Khara also expressed confidence in growing the bank’s international banking vertical with the government thrust on export-oriented manufacturing. The bank’s international balance sheet of $60 billion is expected to reach $200 billion when India’s GDP grows from the current $3.5 trillion to $5 trillion.
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South Asia opportunity
Commenting on the opportunity in the South Asian market, Khara said, “We operate in Sri Lanka, Bangladesh and Maldives. We will have a controlling office of these offices housed at GIFT IFSC with a combined assets size of$15-20 billion currently. We believe South Asia will assume a greater significance in the days to come. If India becomes a manufacturing hub for exports for many of the global players, then these markets would be the immediate markets which would be available for tapping.”
“Our operations are already there in these countries and will help us in providing the required support to all the manufacturers who would be exporting to all these countries,” he added.
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