Bank lending, deposit rates have bottomed out: SBI chief Dinesh Khara

Bank lending rates “have actually bottomed”, and will remain at these levels for a while till the economy recovers, Dinesh Kumar Khara, chairman of the country’s largest lender, State Bank of India (SBI), told Business Standard in an exclusive interview on Wednesday.

Khara said SBI and other banks in the country were aware that the economy required softer rates to continue. “We are very mindful of supporting growth at this point of time.” 

On Friday, the Reserve Bank of India (RBI) is expected to maintain the "status quo" as far as its policy rate and stance are concerned, said Khara, who took over from Rajnish Kumar as SBI chairman in early October.  

Unlike Kumar though, Khara is in no hurry to list YONO, SBI’s digital banking application. Rather, he said the bank would evaluate various options for the app, which Kumar once had estimated could be valued at $40-50 billion. 

According to the SBI chairman, the economy is witnessing a turnaround. Loan demands, especially from the retail segment, have been robust during the festive season. But the overall credit growth is still conditional on how fast the economy rebounds and supply chain issues get sorted out. The 7 per cent-plus inflation rate, for example, was a direct consequence of this supply chain logjam, Khara said. In a post-Covid world, however, “demand will come back with vengeance,” he added.

SBI, he said, was well provisioned, and there would be no change in the provisioning policy. “There's no change in our policy, we would rather like to identify the stress in advance and take a pragmatic view to address the stress,” he said. 

The bank is also racing against time to meet the tight deadline set by the RBI to restructure 26 stressed sectors identified by the KV Kamath committee.  

Against the March deadline, “internally, we are targeting to compete the restructuring exercise to the extent of 50 per cent by December, and the remaining 50 per cent by February”, Khara said.  

SBI would extend the benefit to all those who deserve restructuring, be it corporates or individuals. To that extent, the bank’s one-time settlement (OTS) scheme is also very ‘liberal’, the SBI chairman said.  

The proceedings under the Insolvency and Bankruptcy Code (IBC) would start picking up pace, and the bank would get active there, but it would still try to settle the large accounts in a consortium outside the insolvency mechanism, and would ideally prefer the smaller accounts to come for the OTS. Unlike other banks though, SBI’s personal loan segment is not stressed because the bank gives express loans to customers who maintain salary accounts. The bank takes salary accounts of the government, top-rated corporates, and public sector enterprises who weathered the Covid stress much easily than others.