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Any decision to support cash-strapped IL&FS will be taken by State Bank of India’s board keeping in view the larger interest of the banking and financial services industry as well as protecting the bank’s own shareholders’ interests, according to Chairman Rajnish Kumar.
These comments come in the backdrop of insurance behemoth Life Insurance Corporation of India assuring that it will do all it can to prevent the collapse of beleaguered IL&FS, which has now begun to implode and started to renege on several of its repayment obligations.
As a leader in the banking and financial services industry, Kumar said SBI will do everything that helps in stabilising the financial system. Life Insurance Corporation of India and State Bank of India have 25.34 per cent and 6.42 per cent stake, respectively, in IL&FS.
Ratings downgraded
Debt-laden IL&FS, and some of its subsidiaries, have seen their ratings downgraded by credit rating agencies in the last one month.
Defaults on debt (commercial papers and intercorporate deposits) by these entities have had a cascading impact on the financial system, with some mutual funds pressing secondary market sales of non-convertible debentures of non-banking finance companies at higher yields to meet redemption pressures.
“So that (stabilising the financial system) is where our obligation or responsibility or duty is….there has to be a concrete proposal (from IL&FS) and that has to be examined by SBI.
“And SBI’s board will take a decision in the larger interest…of the industry as well as protect SBI’s own shareholders’ interests,” said Kumar on the sidelines of an event to launch Apollo SBI Card, a co-branded credit card in the healthcare segment.
On the Supreme Court’s verdict, which said Aadhaar is not mandatory for opening bank accounts, Kumar observed that Aadhaar is a very convenient mode for opening a bank account. Today, on SBI’s digital channels, an account can be opened with an Aadhaar card within five minutes and the account becomes operational.
“Now this (Aadhaar) is not mandatory….But from the services point of view, I believe, it is a great facility. And today, we open 27,000 accounts per day digitally with no paper work. Within five minutes you can operate the account.
“And once the biometric details are captured, it becomes a full-fledged service account. So, we have to see the convenience, but it has to be with the customer’s consent and there cannot be any compulsion,” said the SBI chief.
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