Friday, August 3, 2012

Trying to increase coverage in retail space: Pratip Chaudhuri

Mumbai, August 2: In an interview with ET Now, Pratip Chaudhuri, Chairman of State Bank of India, gives his views on the RBI monetary policy and rate cuts. Excerpts:
ET Now: Firstly, how much of a benefit will SBI get from the cut in SLR announced by the RBI in this policy?
Pratip Chaudhuri: We thank the RBI. The policy had become two-dimensional. People used to only talk about the repo rate and a possible CRR cut. But the RBI added a third dimension of injecting liquidity beyond these two instruments, i.e. repo rate and CRR cut. Last time they increased the refinance component on export credit from 15% to 50%. This has given us an additional Rs 5000 crore.
The SLR cut has released about Rs 10000 crore for SBI. So what it means to my mind is that Rs 10000 crore which was locked up in low-yield SLR security, we would have greater urgency to deploy that in productive sectors.
ET Now: How much is your present SLR holding and would you look at taking benefit of the SLR reduction limit which was announced by the Reserve Bank of India on Tuesday?
Pratip Chaudhuri: Our SLR holding is currently about 28%. With this 1% reduction, it would become about 4% surplus. So you can either sell, depending on where that particular scrip is trading. Even if you don't sell, you can always put it into LAF and get liquidity. So roughly we have Rs 40000 crore of extra liquidity.
ET Now: Is the cut in your base rates as well in the pipeline then?
Pratip Chaudhuri: Not a broad-base rate cut. Only car loan and home loans are being targeted because we think that the instrument of interest rate should be used for increasing the credit flow.
So we think that the impact of cutting interest rates would be highest in these 2 segments -- home and car loans. No matter what is the interest rate for the corporate sector, there is hardly any demand for term loans. Working capital loans are also not in high demand because currently the commercial papers are going at about 9.3 to 9.7, which is below the base rates of all banks. So we are trying to increase our coverage in the retail space.


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