Don't expect CRR hike in next RBI policy review, says SBI chairman

Loan growth could be better than in previous fiscal

At a time when the Reserve Bank of India (RBI) is sucking out liquidity from the banking system amid inflationary pressures in the economy, the head of the country’s largest lender has said he does not expect a further hike in the cash reserve ratio (CRR) requirements for the banking industry in the upcoming policy review, scheduled next week.

In a surprise move last month, the six-member monetary policy committee (MPC) raised the repo rate by 40 basis points (bps) to 4.40 per cent in an off-cycle meeting. Also, the central bank hiked CRR by 50 bps to 4.5 per cent, leading to the withdrawal of Rs 87,000 crore of liquidity from the banking system.

“I don’t expect CRR to be hiked further. The 50 bps (hike) itself has sucked out Rs 87,000 crore,” Dinesh Kumar Khara, chairman, State Bank of India (SBI), told Business Standard in an interview.

The net liquidity absorption by the RBI fell to Rs 3.27 trillion on Tuesday from close to Rs 5 trillion at the end of April, indicating the kind of liquidity surplus that prevailed in the banking system until recently is no longer available.

Khara, however, said SBI’s loan growth would not be impacted much due to the draining of excess liquidity. “As far as we are concerned, we are quite comfortably placed. We have a decent AFS (available for sale) book also, which enables us to ensure that there is enough liquidity. If at all we see decent growth in credit, we can also make that available for support. If I look at YoY (year-on-year) growth in credit as well as advances, I am seeing a healthy trend. So that gives me confidence,” he said.

Khara said the robust loan demand that SBI witnessed during the fourth quarter is expected to continue in the current financial year. The bank would see similar loan growth in 2022-23, if not better, he said.

“When we look at the loan growth of the last quarter of the last financial year, this was essentially attributed to better utilisation of working capital limits of large corporates and also availing the term-loan facility which were sanctioned. That trend still continues. We also got a healthy pipeline of the proposals, which are under process. So that augurs well for the corporate credit growth,” he said.

When asked about loan growth the bank expects in FY23, Khara said, “We expect it to be at the same level, if not better. It could be better too.”

SBI registered a loan growth of 11 per cent in the last financial year, while loan growth from domestic operations was 10.27 per cent. Corporate loans registered a growth rate of 11.15 per cent sequentially during the January-March quarter.

He said capacity utilisation has improved in the economy, which is beyond 72%. “So as and when we see capacity utilisation improving beyond a threshold, it certainly needs better utilisation of the working capital,” he said.

“Our retail engine continues to do well…And we will have support from the corporate side also. That is why we hope we will get a decent credit growth in the current financial year too,” he added.