The Hindu Business Line : SBI says clients’ losses could be above Rs 600 cr in currency derivatives

Tackling sub-prime: The SBI Chairman, Mr O. P. Bhatt (right), with the FICCI President, Mr Rajeev Chandrasekhar, at the federation’s national executive committee meeting in Mumbai on Wednesday.

Our Bureau

Mumbai, April 23 The losses suffered by the corporate clients of State Bank of India on account of currency derivatives could range between Rs 600 crore and Rs 700 crore in the just ended fiscal, said Mr O.P. Bhatt, Chairman of SBI. While the bank has a fair amount of derivatives transactions, it has not done any ‘exotic deals’, he said.

Speaking at a seminar organised by FICCI, Mr Bhatt said that SBI has structured derivative deals only for its customers and each deal has an underlying clause. “In our books there is no provision on this account,” he said.

No customer has taken legal action against SBI, Mr Bhatt said.

Some companies have gone to court against private banks such as ICICI Bank, Axis Bank and Kotak Mahindra Bank over the losses suffered in currency derivatives.

The companies have alleged that banks had ‘mis-sold’ the derivative products to them, without explaining the impact of possible losses.

SBI will make a provision of $10 million (approximately Rs 40 crore) on its marked-to-market losses on account of exposure to sub-prime paper in its overseas operations, he said.

Mr Bhatt said that while the impact will be seen in the bank’s bottomline in the fourth quarter of the just ended fiscal, the situation is not getting worse.

“We don’t have exposure to any sub-prime paper except this, which we are marking to market. This is not exposure to Credit Linked Derivative Notes, but some investment we made in Fortis Bank,” he said.

Credit growth

Mr Bhatt said that credit growth in fiscal 2008-9 is likely to be around 22 per cent, which is roughly the same as that of fiscal 2007-08.

He also said that deposit rates are unlikely to rise.

The home loan segment is likely to see growth between 20 per cent and 22 per cent and the bank hopes to maintain its top position in the segment, Mr Bhatt said.

While speculative demand for housing loans has slowed down, actual demand from first time buyers is still strong, he said.

On Wednesday, shares of SBI closed at Rs 1,695.9, against the previous close of Rs 1,732.2, down 2.1 per cent on the BSE.