State Bank of India Chairman Om Prakash Bhatt told Sidhartha that the offer should help boost demand in the two sectors that have suffered the most. Edited excerpts:
Is the move aimed at stepping up lending?
Within SBI, we have been talking about it for more than a fortnight. There have been concerns that banks are not lending. But it is not true. Banks, especially the ones in the public sector, have not lent at this scale in the first nine months as they have done this year. It is evident from the data. What has happened is that funding from other sources has dried up and banks have not been able to fully offset that. This has resulted in the mistaken notion that banks are not lending. The Reserve Bank of India has taken several steps that have released a large amount of resources and liquidity is no longer a problem.
What prompted you?
SMEs (small and medium enterprises) are facing pressure due to demand compression and the housing sector demand has been low since people are waiting for prices to decline further. As a result the two sectors have been affected the most. These are also two sectors that are very employment-intensive. As a banker to every Indian we have been thinking of what we should do. At the same time we did not want to burn all the bridges so we opened a special window for 90 days. The scheme will be available to anyone who draws the first installment by the end of April. When we announced the special home loan scheme last month, we had promised to reduce the rates if it was possible for us.
What will be the impact on the income side?
If we sanction Rs 500 crore, we stand to lose around Rs 10 crore. If it is Rs 5,000 crore, the loss will be Rs 100 crore. Whatever is the hit, it will be made up through higher volumes. We are hoping to generate large volumes and also stimulate activity in the two sectors.
Can borrowers who already have a loan from another bank shift to SBI?
Yes, we will allow people to transfer loans. For us, he is a new customer.
Having done this, will you reduce the prime lending rate (PLR)?
We have only decided on this special offer. We have not decided on the PLR. By doing this we have covered the two most vulnerable and affected segments.
Is the cost of funds hampering your decision to lower PLR?
The results are there. Between the end of September and the end of December, costs have not come down. Credit growth has not been there in recent weeks. So, RBI may release additional liquidity.
Do you see a drop in demand for corporate loans?
New projects are taking approvals but they are not taking the loans.