SBI says no liquidity crunch, but focus on good quality assets

Written by Press Trust of India | Mumbai | Updated: Oct 1 2013, 15:33pm hrs
The country's largest lender State Bank of India (SBI) today said it is not facing any liquidity crunch and the selectiveness in opening letters of credit facility is part of its strategy to lend to better-rated companies.

"The letter of credit business constitutes only around five per cent of our cash management business and out of that only around 2 per cent come from non-SBI group banks," SBI Managing Director and chief financial officer Arundhati Bhattacharya said.

Earlier in the day the media reports suggested that due to liquidity crunch SBI has directed its offices to stop discounting letters of credit other than those opened by it and its associate bank.

The bank has stopped discounting LCs other than those opened by itself and the associate banks. It can be noted that a LC helps a seller receive payments against a bill with a longer due date against the payment of a fee.

Bhattacharya also said the bank has a lendable liquidity of over Rs 58,000 crore parked in instruments like the SLR (statutory liquidity ratio) and others.

There are two banks involved in an LC transaction, one each at the buyer's end and the seller's end. The buyer's bank opens an LC and the seller's bank discounts it.

"We are being selective in loan disbursals as a conscious attempt to lend to higher-rated companies that too investment-grade corporates now," managing director and head of national banking A Krishna Kumar said.

"We also have been of late regularly going to the MSF window but not to the tune of 2 per cent after fully using up the 0.5 per cent LAF on the back of sharp pick up in credit," Bhattacharya added.

Giving the rationale for the recent hike in deposit rates at the short-term buckets, she said SBI has been witnessing a deposit growth of only 14 per cent and the gap between the offerings in the market and the bank was up to 1.50 per cent at the short-end which needed to be corrected.

On a specific query about RBI asking banks to stop zero per cent interest EMI options on credit card purchases, Krishnakumar said the bank does not have any such schemes.

Managing director in charge for associates and subsidiaries, S Vishwanathan, however, chipped in clarifying that "I cannot categorically say there is no such offering from SBI Cards as I have not checked with them. But SBI does not have any such offers."

According to a report, the Reserve Bank feels that such schemes erroneously create the impression that bank funding comes for free and hence, wants it stopped.

Vishwanathan also said he had submitted the report on merger of a subsidiary to the outgoing chairman but he said the new chairman will finalise the name, which will be announced shortly.