Saturday, September 8, 2012

No pressure from government to cut rates: Pratip Chaudhuri

Mumbai, September 7: In an interview with ET Now, Pratip Chaudhuri, chairman, SBI, talks about the rationale behind their decision to cut rates as well as credit growth targets and the expected NPA levels in Q2. Edited excerpts:
ET Now: Take us through the rationale behind your decision to cut deposit rate.
Pratip Chaudhuri: Yes. Our deposit growth has been very robust from April 1 to August 31. The deposits have grown by Rs 75,000 crore and the loan growth, including commercial paper, has been only Rs 30,000 crore. Therefore, we thought we will try to restrict and moderate our deposit growth.
ET Now: Are PSU banks cutting rates under pressure from the government even though SBI has been the first to do so?
Pratip Chaudhuri: We don't cut rates because of pressure from the government. PSU banks decide their rates on their own. But while deciding the rate, one has to look at the market and the relative positioning of the bank. We adjust the rate looking at the demand. For example, in our case, we reduced the car and home loan rates thinking that the reduction would allow growth in the loan book for cars and homes.
ET Now: But many banks have revised their credit growth targets in light of low demand. Is there is a similar thought at SBI as well?
Pratip Chaudhuri: These targets are not our own. The targets are largely determined and shaped by the volumes you see. It is very easy to move the credit growth target up, but where are the deposits? Similarly, if you get more deposits and there is not enough traction in the credit market, then you have to calibrate it down. Therefore, it is always a function of demand and supply. And I do not think the individual target-settings by banks are anyway meaningful.
ET Now: What kind of loan growth are you seeing and sectors will drive this demand?
Pratip Chaudhuri: For our bank, the biggest contributor has been the construction sector, particularly the contracting firms and companies which are doing work for state government agencies. Next are the electrical machinery and the power sector which are selling their produce to the distribution companies. These have been the two biggest sectors.
There was some worry on the iron and steel front because there were problems as far as iron ore mining and availability of iron ore is concerned. The iron ore mining situation is becoming slightly better. Therefore, we expect the steel sector's raw material availability to rise and their finances to improve as well.
ET Now: Tell us about your asset quality, especially in terms of the power, iron and steel sectors. Which sectors are likely to be the biggest contributors to your NPA situation?
Pratip Chaudhuri: The levels can be known with some degree of accuracy only by the 20th or 25th of the month following the quarter, but we are working hard to control these levels.
ET Now: What kind of NPA levels are you expecting in Q2?
Pratip Chaudhuri: Restructuring pipeline is not very different from the delinquent pipeline. Therefore, for companies that are under stress but have real value asset and want to borrow against that, we are considering extending the tenure of the loans or making available more loans.
ET Now: What is the extent of restructuring that you are expecting in the second quarter? Tell us what the pipeline is looking like.
Pratip Chaudhuri: Under the SBI Act, the minimum government holding has to be 51%. Therefore, I do not think it is right for me to comment because the government's holding percentage has to be determined by the government. I can only tell you that the government has left no stone unturned in capitalising the public sector banks. Last year, they pumped in about Rs 15,000 to 20,000 crore of equity to keep the pubic sector banks well capitalised.
Therefore, I do not think anybody should doubt the commitment and ability of the government to keep the banks well capitalised. But at the same time it is important that the banks generate sufficiently large internal surpluses.


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