State Bank of India’s capital adequacy is quite good and well above what is mandated, Chairman Arundhati Bhattacharya said.

“We do not have any issues having sufficient growth capital as of now. If the Indian economy grows at a very fast clip of 16-18 % only then we see an immediate requirement for further growth capital,” Bhattacharya said at the launch of the ‘FTSE SBI Bond Index Series’ at London Stock Exchange.

Non-performing assets

On the issue of non-performing assets, she said that the Indian banking sector was likely past its hump. “We didn’t really have any transparent or open manner of resolving stress tests…today with the bankruptcy law that gap has been filled.

“…the law is still in its infancy and our hope going forward is that it will continue to perform the way it was meant to perform….if it performs...definitely going forward in India non-performing assets will take a different shape.”

Stating that there is a lot of potential in the country, she said “we should not be diverted by this one issue of non-performing assets as is it under the process of resolution.”

De-merging on

SBI is in the process of de-merging its UK business — currently comprising one main branch focussed on wholesale business and 11 branches focussed on the retail sector.

The main branch in London will remain a branch of SBI while the retail branches will form a subsidiary that will be incorporated in the UK.

The de-merger is set to complete by the end of this year or early next. “There will be much greater focus on the retail business because it will be on its own — it will have to prove itself on its own…it will be totally a local operation,” Bhattacharya said.

The bank, she said, would try to bring the “very best of IT” and processes being used in India to the UK subsidiary that would work with the Indian diaspora and beyond, with plans to introduce services already in place in India such as the account opening machine and debit card printing machine.

Brexit effect

She acknowledged that Brexit posed “little bit” of a challenge to its plans for its subsidiary. “We had hoped that when the subsidiary is up and running we could possibly use the passporting rights to have branches of the subsidiary in Europe which at this time I think may not happen…Europe happens to be one of India’s biggest trading partners so we will see what can be done.”

GST, demonetisation

Asked about concerns about the impact of the introduction of GST and demonetisation on India’s growth, she said: “You need some short-term pain for long-term gains. You cannot do a major restructure without expecting it to hit the growth rate somewhere or another.

“If as a result of it you back off from making structural reforms it doesn’t speak well of anybody…these growth rates for two or three quarters will soon be forgotten.”

She said that banks gained in two areas as a result of demonetisation: the huge increase in resources enabled banks to bring down the rate of lending by almost 100 basis points, and the increase in digitisation resulted in about three years’ work happening in around 60 days.

“The only negative was…we had to keep aside our regular activities and just do money exchange during that period of time: home loans car loans were put aside. We just didn’t have the resources to do both so that was definitely an issue.

“The other issue we had these humongous lines and people had to take a lot of trouble to get their notes changed. We tried to make it as painless as possible…but still there was obviously a lot of discomfort that people had to go through.”

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