SBI chairman Pratip Chaudhuri tells Abhijeet Lele while the downgrade per se will not hurt the bank so much, going ahead, there are concerns on mid-sized corporate loans and the agriculture portfolio. Edited excerpts:
What does the downgrade mean for the bank?
It means little. While the rating on hybrid instruments (equity-cum-debt bonds) has been downgraded, the comprehensive rating for the bank (Baa2) is higher than the the Government of India rating (Baa3). The bank has an outstanding hybrid capital of $400 million issued to international investors.
Is it a warning note to the government that there should be increased urgency on capital infusion? Would the rights issue happen this year?
It is a reminder to the government that the capital infusion should happen to improve the Tier-1 base. We have spoken to the government for a capital support of Rs 15,000-25,000 crore for a three-year period. The first tranche could happen in this financial year itself or in calendar year 2012.
Are the third and fourth quarters expected to be better than the second quarter?
There is an economic slowdown and the credit growth would moderate. The bank has begun to invest in commercial papers of healthy companies at rates above 9.5 per cent. This is better than keeping the cash idle.
Are corporate bad loans expected to increase? How are you dealing with it?
There is a definite concern over slippages, especially in case of mid-sized companies. The agriculture portfolio is also showing signs of stress. We expect some modification in norms by the Reserve Bank of India for dealing with the restructured portfolio.
