• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Shashi Ashiwal

Mr O.P. Bhatt, Chairman, SBI, at a banking conference in Mumbai on Thursday. –

Our Bureau

Mumbai, Nov. 6 Mr O.P. Bhatt, Chairman, State Bank of India, has said that he expects no slowdown in credit growth in the current fiscal, but banks may see a rise in their bad loans due to moderation in the economic growth.

In the last four years, banks have seen an average loan growth of around 30 per cent. Loan growth, more or less at the same level so far in the current year, is unlikely to slow down.

This is because trade and industry will continue to depend on banks for credit as all other avenues for raising resources have dried up.

Speaking at the FICCI-IBA Annual Banking Summit here on Thursday, Mr Bhatt said banks would need to raise capital as the onus of funding corporates had shifted to them in the context of other sources of funding (external commercial borrowings, foreign currency convertible bonds, and lines of credit from overseas financial institutions) drying up; they would also have to take care of the write-offs on account of stressed assets.

SBI, which announced a cut in both lending and deposit rates, is planning to raise between Rs 5,000 crore to Rs. 10,000 crore by way of subordinated debt (Tier-II) capital to improve its resource position, by December.

“Liquidity is a big issue. There is no problem with liquidity at this point in time. But we need liquidity not only in the short-term, but in the long-term as well. There is going to be some pressure on liquidity next month as it’s a time when typically the busy season starts and the government borrowings increase,” said Mr Bhatt on the sidelines of the banking summit.

He underscored the fact that the policymakers were monitoring the liquidity situation on a daily basis and when required appropriate liquidity management measures would be taken. Calling for reforms in the financial sector by encouraging foreign direct investment in the banking and insurance sectors, the SBI chief felt that banks should tighten their risk management practices by paying attention to credit, market, operations, counter-party and concentration risks.

Further, there was a need to revisit regulations in order to bring entities that are not being regulated under the regulatory purview.

The SBI chief said India had a strong, prudent and well-regulated banking system.

“In terms of key banking parameters such as capital adequacy ratios, return on equity, NPAs, etc., we are better than world-class banks,” he added.

The bank, which has a credit-deposit ratio of 74 per cent, is not facing any mismatch between loans and deposits, he added.

SBI on Thursday decided to reduce the benchmark prime lending rate by 75 basis points to 13 per cent with effect from November 10. The bank also cut the deposit rates by 50 bps across the maturities from 91 days up to 5 years and by 25 bps for deposits with maturities of 5 years and above effective from December 1.

Mr Bhat said the rate cut would boost demand for home loans and lead to a reduction in equated monthly instalments.

SBI had launched a 1000-day deposit scheme at an interest rate of 10.5 per cent. According to Mr Bhatt, the bank was able to mobilise on an averge Rs 1,000 crore every day.

More Stories on : Credit Market | Non-Performing Assets | State Bank of India

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line