State Bank of India (SBI) Chairman Pratip Chaudhury has cautioned associate banks against committing short-term funds for long-gestation projects.
He said this with specific reference to exposure to a series of big-ticket infrastructure projects in Kerala, where State Bank of Travancore (SBT), an associate bank, is headquartered.
BIG PROJECTS
Chaudhuri was here to attend the annual general meeting of the associate bank and also a corporate social responsibility event that coincided with it.
Among projects announced in the State are Metro Rail in Kochi; monorail in Thiruvananthapuram and Kozhikode; a high-speed rail corridor; the Vizhinjam container terminal and the Kannur international airport.
By no chance should short-term funds be advanced to these projects since it could lead to a mismatch of deposit base versus long-term advances committed.
Chaudhury advised banks to examine how and when revenue stream from a project starts kicking in. It is easy to take a decision on projects, for instance Metro or monorail, with an assured revenue stream.
NOT SAME
It would not be the case with projects such as a flyover or a bridge, which propped up the contentious issue of toll as a means of realising costs over a period of time.
Chaudhury said parent SBI was sitting on a cash surplus of Rs 40,000 crore. It is willing to fund projects being executed by reputed contractors known for speed of implementation.
Separately, he reiterated his demand that all loans, including home and vehicle, be brought under a single regulator.
Why should there be a separate regulation for commercial banks and housing finance companies when they lend funds to the same sector, he wondered.
PAT FOR SBT
He complimented SBT for maintaining a good credit-to-deposit ratio of 69 per cent, indicating the extent of credit sanctioned within the home State relative to the deposit base.
This should help remove the misconception that the bank is taking away funds outside for investing in lucrative projects in other States.
Chaudhury said the associate bank had revealed solid financial position with a net profit of Rs 615 crore during 2012-13, backed up with a deposit base of Rs 85,000 crore and advances of Rs 67,000 crore.