In a no-holds-barred interaction with the media a day before his superannuation, Mr O. P. Bhatt, Chairman, spoke his mind on the special home loans scheme, deregulation of savings bank rate, his ‘working relationship' with the banking regulator, and why dissent is healthy in public discourse.

On special ‘teaser' home scheme:

Our special home loan product is not at all similar to what was there in the global markets or in US.

In the US, the home loans, which caused the sub-prime crisis, were given to people who had no jobs, no income, and no assets. In the last many years, real estate was appreciating between 5 to 10 per cent every year in the US. There was an assumption that it will continue to happen in the future also. So, the assumption was that if you give a home loan today and in a year or two if the borrower is not able to repay, the property would have appreciated, he can always sell the property, repay the loan and go away. So, the bank did not suffer any loss. These loans were sub-prime to begin with because the borrower did not have any income, no wherewithal.

But our home loans are given based on job or income criteria only. We take into account the borrower's take home salary after loan repayment and provident fund deduction. If the take home pay is, say, Rs 100, then the quantum of loan will be such that the borrower's EMI is not more than Rs 40. Proof of salary is in the form of income tax deduction certificate. We stringently assess affordability, suitability, and eligibility for home loans. Our borrower is not sub-prime. The selection of the borrower is such that he is a creditworthy individual.

SBI tells the borrower clearly that his or her EMI works out to Rs 40, but we will take Rs 35 as EMI in the first year, Rs 36 in the second year, Rs 38 in the third and Rs 40 after the third year. This, we give it in writing. So, it is totally transparent. There is no element of surprise. After three years when we take Rs 40 as EMI, there is a 99 per cent possibility that the borrower's take home pay would have increased to Rs 105 or Rs 110 or Rs 120. Then in percentage terms, the loan becomes less risky as the EMI is less than 40 per cent of the take home pay. So, the loan is totally de-risked. The RBI has not understood this.

Differing with the regulator on provision coverage ratio and special loan schemes:

Till today, I would like to place it on record that SBI is 100 per cent compliant with everything that the RBI wants us to do. But wherever we have felt that the regulator could or should have done differently, we have represented to them, whether it is provision coverage ratio or the special home loans scheme. And after the representation, we have done exactly what they have asked us to do.

In the case of PCR, we thought that it was just arbitrarily raised to 70 per cent. We did make a representation, but RBI did not agree. Then we said that we cannot do it in one year because it would involve more than a year's profit. So, they have given us a time-table and we are scrupulously adhering to it.

In the case of special home loans, if they agree to our reasoning, then there is no issue. Even if they don't, we will make whatever provisioning is required.

SBI group has a 25 per cent market share in the banking system. I believe it is our responsibility or duty that if at all we have a different point-of-view than others in the system, then we must articulate it in the interest of intellectual honesty, in the interest of public discourse, and in the interest of evolution of public policy. So, that is what we have been doing and it requires courage of conviction to do be able to do that.

We have not been irresponsible, we have not misbehaved, and we have not used wrong words. Till date, during my tenure, there has been no deviation from any compliance, not only in India but in any of the 32 countries that we operate.

Deregulation of savings bank rate:

The savings bank is a unique product. No other country has it. It has done quite well, I think, for a large number of small savers, who cannot have recurring deposit or fixed deposits.

There are about 400 million people in this country who earn less than Rs 50 a day. When they are able to save, they save 5 or 10 or 20 Rupees in a SB account. They cannot save in a FD or RD because their incomes are irregular.

But once, SB rate gets deregulated, with interest rates going up and down, the small customers will have difficulty.

Also, there are a large number of government organisations that get a lot of grants, which they cannot keep in FDs. So, either they can keep the funds in a current account or SB account. While the current account will not earn any interest, the SB account will fetch them something.

The cost of resources for PSBs, because we have been servicing the largest part of this clientele – both government accounts and the small customers – is low due to low cost Current and Savings Bank account deposits, which have improved significantly. This has helped us to reduce our cost of resources. This, in turn, has reduced the cost of working in the Indian economy. These are all good things.

PSBs, with 72 per cent of market share, do most of the developmental activity in this country. So, if we are weakened due to the higher cost of deposits, which the deregulation will entail, our ability to do the kind of work that we do, and we do it quite happily and willingly, because it is part of our DNA will get impaired. Does the country want it or deserve it? They don't.

Post retirement plans:

My post retirement plans are still in the making. While there are a few people or organisations who have been trying to engage with me, I felt that it was not proper for me to do so as long as I am with SBI.

In the next two to three months I may travel, I may laze around, I may talk to some of these people. But I will talk to my friends and well-wishers as to what kind of course I should plan for the rest of my life.

Vision for the bank:

The bank has done a lot of things not only in quantitative terms, but in qualitative terms. All of us in the bank have more pride, more belongingness, more confidence, more of a ‘can do' attitude. So, a qualitative shift has taken place in the minds of our people.

Also, we have become a more service oriented organisation. We really want to do better by our customers in every which way. We keep thinking how best to serve the customer by way of technology, by way of processes, by way of organisation structure and so many things that we are doing. This is one of the biggest gains that has happened in the bank. We no longer think that we are second rate. We think that we are the best bank in the universe, the best bank in India. We are not afraid of competition. We are not afraid of new products, new technology, new skills. So, this is partly psychological, but it is grounded in reality. I would like these things to continue in future.

Leadership institute for SBI:

There is a proposal to set up a leadership institute for the SBI. We also want to distinguish leadership from executive education or from management education. So, leadership has components of management and executive education. But it is more in terms of mindsets and traits and a different kind of set of abilities.

We want to find a way of creating an institution where we can identify leadership traits that are required, identify the gaps in leadership traits, find ways of helping people to overcome those gaps.

How we will do it and what kind of institute we will come up is still work in progress. It's a question of methodology, content, process and so many things which are yet to be worked out.

Since I'm retiring, as of now, I have no role. If the bank chooses to engage me in some way I would think about it. If I can, I would love to do that because this is something which has been one of my passions for the bank.

Wearing an entrepreneurial hat:

I don't think I have got that entrepreneurial talent. I may be able to sustain or improve an existing organisation. I may be innovative but not entrepreneurial.

Any unfinished agenda?

There is always an unfinished agenda because things keep on changing. But in a more tangible sense, for example, I would have loved to have merged all the associate banks. I would have liked to raise some more capital for the bank. That has not happened.

But it is not a great disappointment because the process is on and you cannot always define a timeline. So, it may happen this year or next year or a year after that.

Achievements:

We use more technology these days. For example, for NPAs, which is a major concern, we use technology. All our NPAs are mapped to some employee or the other across the organisation through a web and we can actually go into the website and see that the employee has contacted the customer, sent him a letter, made a phone call, what is the customer response, if NPAs have gone up or down.

We have SBI ‘Happy' service. You can SMS and within seconds you will get a response in case you got a customer complaint.

We have become more comfortable and at ease with technology in the bank and we are looking at newer and innovative ways to use technology.

SBI and other public sector banks:

There has been a positive contagion effect because of what has happened in SBI in the entire public sector banking space. All public sector banks are trying to understand what we have done and how we have done and are trying to implement it themselves - be it the organisational transformation, loan processing, marketing strategies, branch and ATM expansion and recruitment.

By following what SBI has been successful at, the entire PSB structure has become much stronger than what it was before. This collective strength of PSBs will continue.

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