Mr Pratip Chaudhuri, Chairman, State Bank of India, indicated on Thursday that the bank's profitability during the first and second quarters of the current fiscal could be slightly subdued on account of provisioning towards building a ‘counter-cyclical buffer' as mandated by the Reserve Bank of India (RBI).
RBI stipulation
“SBI's profitability in Q1 and Q2 will be conditioned by the RBI stipulated provisioning, though high net interest margin could offset the impact. We should start seeing some good profits starting the third quarter of this fiscal,” Mr Chaudhuri told newspersons on the sidelines of a banking summit organised by the Federation of Indian Chambers of Commerce and Industry here on Thursday.
In April, the RBI had advised banks to segregate the surplus of provisions under the provision-coverage ratio (PCR)
The counter-cyclical buffer so created would be available to banks for making specific provisions during economic downturns.
In May, the SBI chief had said that the bank would have to keep aside Rs 1,100 crore over the first two quarters of fiscal 2011-12 towards counter-cyclical provisions.
NIM may improve
The net interest margin is, however, likely to be better on account of the higher interest rate regime, he pointed out. “The NIM is looking good due to the high interest rate. So, despite other pressures such as provisioning, the higher NIMs could offset the loss in profitability to some extent,” he pointed out.
The bank's NIM during the first quarter of the current fiscal has improved to 3.6 per cent, against 3.15 per cent during the corresponding period last year. “NIM is looking better, there has been improvement this quarter,” he said. The bank had earlier projected a NIM of 3.5 per cent.
Growth target revised
SBI has revised its growth target to 16-19 per cent, against its earlier forecast of 19-21 per cent. “There has been some moderation of growth in the economy. However, though borrowing could be lower in rupee terms, that is likely to be offset by borrowing in dollar or euro terms,” he said. Demand for term credit was likely to be muted, he pointed out.