We are seeing traction in the economic base: SBI Chairman

Challenges are essentially coming on account of price inflation,. Crude prices are of concern, but the recent action by the US will help in pulling down the pricing eventually. But the major cause is the Ukraine – Russia war. That we’ll have to wait and watch. The government came to support of the economy and reduced the taxes and duties on crude. The call on 10 per cent ethanol blending will also help. Various steps are being taken to address the impact of crude price-related inflation. So in the near term there should be some relief.

It might not adversely affect the credit offtake. Capacity utilisation went up to 74.5 per cent and that leads to credit availment. Unavailed working capital limits have come down to 45 per cent and is clearly a reflection that there is a demand for credit. Similarly, we see demand for investment credit. It has been patchy, but it is there. Our project financing vertical has proposals for about ₹50,000 –60,000 crore and there also availment has started happening. These are some of the positives. Post Covid, everybody was raring to go (for expansions). It got dampened a bit on account of the geopolitical situations, but I think the urge to go back is very much there. So, 7.2 per cent is the growth expected. This is one of the best growth expected among global economies.  

If we look at the interest rate hike as a component of the overall interest and suppose if at all 100 per cent is transmitted we would be around 7.4 points. In terms of percentage, it doesn’t make much of a difference. It must be seen in the context that even the salary is also rising. When there is 10 per cent increase in salary, and if at all interest rates goes up from 6.5 to 7.4 per cent, it does not really make a difference. Salaries have gone back to pre-Covid level and so have interest rates. In our home loan book, which is ₹5.6 lakh crore, a majority of the borrowers are first time home-buyers. There we don’t expect any impact. So although 90 basis point looks like a big number, when you look at in the context, perhaps it is not as big. Otherwise also our loan to value is around 50 per cent. 

I don’t think so. Retail borrowers have become quite responsible because everybody is aware that if bureau score gets spoilt, the ability to get a loan itself is under danger. For large corporates, there is hardly any stress. SMEs would have some interest burden, but I think they are also very mindful. Normal defaults will always happen depending upon the overall macro environment, but nothing very unusual.

NPAs under the scheme are about 2.2 per cent which are better than the average NPA in the SME sector. But that was at a point of time. After March, all the things really panned out and we’ll have to wait and watch. We had about ₹32,000 crore of restructuring. Out to that, SME was around ₹10,000 crore and we have got a provision of ₹6,600 crore in addition to the regulatory requirement. The intention is to hedge against any possible risk. We have insulated our balance sheet for any potential troubles. 

For corporates, wherever we had the visibility of any potential trouble we have done the provisioning. Even on SME loans, the kind of stress which is there is lesser than the risk we’ve seen in the past. We will try to keep the credit costs below one per cent. 

Last year we grew at about 11 per cent. We should be able to grow more than what we did last year.

Retail will continue to grow as it has been doing in the past. Similarly, corporate growth will come back. Corporates earlier were looking at the debt capital market or equity markets. Debt capital market may not have that kind of liquidity. So, will give us an opportunity. Early signs are that our commercial paper book has started growing. 

We are seeing traction in the economic base. We have finance airports and ports. When it comes to infrastructure bottleneck, ports is one of the major bottlenecks. We are increasingly becoming an export-oriented country and it’s a huge opportunity. PLI and defence sectors are big opportunities.

We started working on first strengthening our SME book, which was about ₹2.2 lakh crore when I came in. It has already reached ₹3 lakh crore and I had set a target of ₹4 lakh crore. Hopefully, we should be there. Second, we want to see that even high value agriculture should not go past us and we are working on that. Third, we are also setting up a operations support subsidiary. 

The interest rate risk is a big challenge. Second, is cyber security. We have a very large number of users who are not very proficient with computer literacy. If they share their credentials, we can’t do anything. We are ensuring that we keep on educating them and in due course, we will look at it and offer that channel only to those who understand it. If people want it, they should understand what they are dealing with. 

We will also be growing, by the time they achieve that number. Competition is a reality of life, it is bound to be there. In fact, way back in 1956, the then Chairman also mentioned that competition is coming in. We have to live with competition.

We are almost there.  In terms of ROE, we are at about 14 per cent. SBI is an asset heavy bank and part of it is because of the kind of banking system which is there. There is hardly any market for secondary loans. We are sticking to the targets. In the previous years, we have not grown as much. So perhaps, this year, we should be in a position to see better efficiency.