SBI saw a 5.3% growth in the domestic credit in Q1 — the lowest in several quarters. Arundhati Bhattacharya, SBI chairman, said the credit growth is tepid due to a slack working capital demand from corporates. Excerpts…
What were the reasons for the rise in slippages?
It’s wrong to see a few things quarter-on-quarter and other year-on-year. So I think you have to understand all these things have a seasonal impact because of which everything is compared y-o-y and not sequentially. Traditionally, in the first quarter we always had higher slippages. If you go back by three years, you will see in FY14 it was Rs 11,000 crore, Rs 9,900 crore in FY15, and this time it is Rs 7,300 crore. So if you look at it on the basis of y-o-y actually the slippage numbers have come down substantially.
We also need to understand what is the quality of the slippages. For the first time, we are seeing the mid-corporate slippage has come very much under control and the main slippages that have occurred are from the retail book.
Agriculture loans always had a problem in the first quarter mainly because people wait for the sowing to comeback and then start renewing their kisan credit cards (KCCs). That is going on in full steam right now and there is a great pullback already on the agri front. On the personal loan front also, traditionally, we had a few problems following up these loans because there are a lot of movements in the form of promotions and transfers. So, there is always a problem in the first quarter.
How has the mid-corporate segment grown and what is your outlook on stress?
For the first time in the eight quarters, we have seen much lesser slippage in the mid-corporate segment. We are beginning to see the lessening of stress in the mid-corporate and our hopes are that two-three quarters down the line, their portfolios will stabilise completely. Even among the SMEs, we are seeing that loans above Rs 20-crore bucket are showing visibly less strain while the maximum is being witnessed in the Rs 1 crore and less bucket.
Overall, I think the stress picture is better and the recovery is having a beneficial impact on the books.
Are further rate cuts expected?
I have been saying this again and again that we will transmit as we see credit growth coming back. But another thing that has happened is that the yields have not really come off which needs to come off for us to get a little more support from the treasury side of the book. Now if these two things happen and the book reprices on the deposit side, all these will give us the ability to bring the net interest margin up again and start passing on some of the cuts into the lending rates. But we will have to wait a little more for credit growth to pickup.
What is your outlook on credit growth?
Credit growth, really speaking, is not happening. Even today, if you see a pick-up in the economy, in terms of credit growth, it is tepid. The banks cannot be delinked from the economy, so obviously, the credit growth has to come back. I think we need to understand the growth we look at is the kind of growth that will stay with us. That is the reason we have been extremely careful about the way we grow and we want to ensure the asset quality holds over for a longer period. Therefore, if we take a little time to go back on the growth path I think it is fully warranted as it is a responsible bank that does it.
Reason why the credit is not growing is because of the weakness in the commodity prices. The working capital requirements are not going up to the extent of their capacity utilisation. Though this is enabling the corporates to have a margin but overall the requirements for credit do not go up to that level. Again as I said as the capacity utilisation gathers steam and as the demand comes back into the economy you will see all of these growing.