State Bank of India, SBI, is planning to raise Rs 41,000 crore through equities and debt in the next couple of years, according to its chairman OP Bhatt.
Speaking to FE, Bhatt said the bank needed to raise this massive fund for its capital requirements that would also include, for the first time, retail bonds.
As a dipping WPI-based inflation is creating headroom for further interest rate cuts, , the country?s largest commercial bank, has made one thing clear with its successive cuts in both home auto loan segment rates ? that it is eyeing an even bigger pie of the Indian banking sector.
?We have, in 2008-09, raised about Rs 8,000 crore of capital mainly by way of tier-II bonds. As the position is comfortable, we do not have any immediate plans to raise tier-I capital. We may, however, raise some tier-II capital through a bond issue for retail investors,? said Bhatt. ?We are pursuing a strategy of aggressive expansion. During 2008-09, we have made significant gains in market share. The market share of the bank in deposits has grown 2.5% and in advances, our share has increased approximately 1.25%, up to the last fortnight.? he said.
On the bank?s growth in advances and deposit he said, ?In advances, we expect to end 2008-08 with a YTD growth of around 25% as against 20% in the previous year. In deposits, however, there has been a huge surge and the YTD growth will be in excess of 34%.?
During February, there are clear signs that the slowdown in credit off-take in recent months is reversing and the bank has grown by over Rs 10,000 crore during this month alone, he revealed.
On whether interest rates would fall further, Bhatt explained that the deposit portfolio of banks comprises bulk deposits to the extent of almost 25%. Of the remaining, the bank?s retail term deposits form the major portion. The demand deposits constitute only a small portion of the bank?s total deposits -around 11 to 13%. Given this kind of structural rigidity, it may not be possible to lower interest rates beyond a point, he observed.
?Nevertheless, in response to signals from the central bank, we have progressively reduced our PLR from 13.75% to 12.25% during the past few months in stages, and further softening in interest rates cannot be ruled out,? he affirmed.
The bank has constantly introduced loan products at sub-PLR rates – in home loans at 8%, auto loans at 10%, special products for SMEs and agriculture sector at 8% and whether to extend the deadline for availing such loan will be taken soon, he said. On the issue of non-performing assets he some loans are being restructured under the ambit of the Reserve Bank of India?s circular instructions. ?While large scale NPA accretion is not expected due to the pro-active measures, some slippages are bound to occur even now and we need to be careful in the future,? he said.
On the plans to merge the rest of the six associates after State Bank Saurashtra(SBS) with SBI, he said the SBS merger experience has been quite encouraging and the synergies are obvious.
?Although technology merger and balance sheet merger have taken place as per schedule, there are a few issues which need to be finalized. The issue of further mergers will be discussed after the new Government is in place,? he said.