State Bank of India (SBI) chairman OP Bhatt expects interest rates to remain stable following the Reserve Bank of India?s review of its annual monetary and credit policy for the third quarter later this month. Bhatt was also of view that the cash reserve ratio (CRR) should not be increased at this point with liquidity overhang in the system and credit growth not happening at the required level.
Talking to the media in Mumbai on Friday, he said, ?I don?t think if there would be any rise in the interest rates at a time when credit growth is not happening at the required level and there is huge liquidity overhang.? There are some banks that are still cutting interest rates on some of their products, said Bhatt while commenting on a series of rate-cuts as being done by private sector banks in retail segment.
Bhatt said SBI has retired bulk deposit worth Rs 60,000 crore. He added, SBI?s loanbook growth would increase to 18% by fiscal-end.
On the proposed capital raising through retail bond by SBI, Bhatt said it was a new instrument. Rather than going for capital raising, the idea was to provide one more instrument to the customers. ?Initially, we would raise merely Rs 100-200 crore through this route to test the appetite of our customers.? He added, the coupon rate for a 10-year tenure will be definitely more than what the bank is offering on the fixed deposit.
SS Ranjan, chief financial officer, SBI, said the size of the retail bond may be somewhere between Rs 3000 and Rs 5,000 crore, timeframe for which was yet to be announced.
Sharing his views with Bhatt, MD Mallya, chairman and managing director of Bank of Baroda, said there are sanctions worth Rs 25,000 crore in his bank?s case, but no withdrawal were happening. ?There have been more sanctions at my bank,? said Mallya. On the banks? possible performance for the current fiscal, Mallya said there may be fall in net interest income (NII), but the net interest margin (NIM) was likely to improve.
?The reason for such a development is that no credit growth is happening in the system which had resulted in the reduction of cost of funds too,?? he said .
Talking about infrastructure financing by banks, Bhatt said banks are very much willing to support the sector.
?Only asset liability mismatch needs to be addressed so that we can do infra lending in a bigger way. Banks are able to raise only short-term deposits, whereas the infra projects needed long-term funds, in the range of 15-20 years. In fact, there is a requirement of long-term fund to be created for the sector as there is a gap of $ 150-250 billon on both equity and debt fronts when it comes to infra financing,? said Bhatt.