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Mumbai-based public sector lender Central Bank of India doesn’t plan to raise its base rate in the near future, despite the fact that the cost of funds has risen following the Reserve Bank of India (RBI)’s liquidity-tightening measures.
“In the last two months, you have definitely seen an escalation in the cost of funds. Absolutely! No two opinions on that. But whether it is going to result in a change of base rate…I don’t think so, as of now. But if we need to do something about it, we’ll have an Alco (asset liability committee) meet,” said Rajiv Rishi, chairman and managing director, Central Bank of India.
The bank’s base rate stands at 10.25 per cent, as is the case with most public sector banks. State Bank of India has the lowest base rate in the industry---9.7 per cent.
Recently, most top private sector banks have increased their base rates. To attract funds, these have also increased deposit rates. However, public sector banks, excluding Union Bank of India and Andhra Bank, haven’t increased lending rates. A few public sector banks had to cut base rates to 10 per cent, following a diktat from the finance ministry.
Rishi said currently, Central Bank of India’s net interest margin (NIM) was comfortable. “As long as I’m able to hold on to my margins, I can’t have a knee-jerk reaction….for a few days of liquidity issues.” For the quarter ended June, the bank’s NIM stood at 2.68 per cent.
“I’m aware (about non-performing assets, or NPAs)…As of now, one of my focus areas is recoveries...I need to get back the money I’ve lent,” Rishi said, adding this wouldn’t be easy. “Going by any standard, gross NPAs are pretty high,” he said. Anything above five per cent would be very discomforting, he added. “As it is, we are above six per cent.”
For the quarter ended June, the bank’s gross NPAs and net NPAs as a proportion of the total stood at 6.03 per cent and 3.85 per cent, respectively.
Rishi said the dismal environment would continue for a couple of quarters. “I think we have resilience to come out of the situation we are in,” he said. The bank had sought capital infusion from the Centre, he added, without specifying the amount.
