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All are talking about green shoots. What’s your take?
I see much more optimism now than six months ago. People are indeed talking about new projects, investments and expansion. But these things take time to fructify. You have to give two quarters after a recovery in economy to see an impact on banks’ books. It’s not an easy process. The project pipeline has really run dry; it will take time to get it moving again. I think we have to wait until January before things get started again.
You mean new projects will start coming from January...
The first push will come from stalled projects, as getting something already on the ground back on track is easier. In the next two quarters, stalled projects will start moving. New projects are at least a year away.
SBI has not grown its loan book since March. Do you think it can repeat last year’s credit growth of 15 per cent this year?
With half the year already over, I don’t think we will reach 15 per cent. This quarter will be low, mainly due to the effect of a high base. We had grown at a high rate last September, especially in the corporate space. Going forward, we definitely see it picking up in October and November. By the end of this quarter, loan growth could be at the same level as March, or there could be some shrinkage.
Isn’t expanding the loan book a conscious strategy?
The fact is, credit demand itself is slow. We are very clear we don’t want to rush in if we see the risk is not in line with our appetite. So, to an extent, it is consciously managed. Unless there is credit demand from good firms, there is no rushing. At present, retail is doing better than the corporate segment.
SBI has seen a decline in bad loans in the last two quarters. Do you think the trend is sustainable or was it a one-off event mainly due to NPA sale?
What will happen is that the numbers will stabilise. The rate of increase of fresh NPA creation will come down. The restructuring pipeline is also less strong than the earlier. The restructuring pipeline was about Rs 3,700 crore but all of these may not be restructured in this quarter.
RBI has eased norms for Basel-III -compliant bonds. What does it mean for SBI?
It’s on the lines of what we had written to RBI. The additional Tier-I (AT1) capital instruments will be a little less costly. We always wanted to take AT1. So far as capital raising is concerned, We don’t need it at this point because we are not growing much. At this point SBI’s capital adequacy is 12.56 per cent if you take into account profits for the quarter ended June 2014. I want to make my bank more profitable at this point. I have enough liquidity and capital to look after my current growth needs.
How much is the surplus liquidity that SBI has?
More than Rs 50,000 crore.
Is there any possibility of reducing the base rate to boost credit growth?
I don't think so. Our base rate is the lowest. I don't think that is the way to boost credit growth
Have you seen a decline in cost of funds?
No, because there is a belief that interest rate is on top of the cycle. That has made more people putting money in fixed deposits rather than putting that in the short end. So, cost of funds has not come down. In fact, it has gone up slightly.
So are you planning to cut deposit rates?
We have already reduced the rate for up to one-year deposits. I don't see any immediate fall in deposits rates for longer tenure maturities.
Do you see RBI reducing interest rate any time soon?
RBI has quite clearly signalled that they will cut rates only if they are sure that inflation is comprehensively under control. I think they will stick to that.
United Bank of India has declared Kingfisher Airlines and Vijay Mallya a wilful defaulter. As the leader of the consortium of lenders, are you also planning such a move?
UBI has done it in respect of a loan taken from outside the consortium. For the loan given by the consortium, we have been looking at ways and means of doing it and as a result, we have also ordered a special audit. If the audit finding gives us a good ground for doing it, we will do it.
There is a new found aggression among public sector banks, which is evident from the proactive steps they are taking in cases like KFA or Bhushan Steel. What has changed?
Banks have always been trying to recover assets as far as possible. The reason why it is being noticed now is because the numbers are big and high profile accounts are involved. One of the reasons that stops fast action is that we have a rule of law and we have to go through the courts. In respect of the account that you are mentioning (Kingfisher), 22 court cases are there. We have to put in a large number of resources to fight these cases. It's not as if you want to do something and you can do it tomorrow.
We are asking both the government and the regulator to provide teeth to the regulations that are available to ensure we can get things done faster. Wilful default is not a law at present; it is a regulation. We need a wilful defaulter law, we need a bankruptcy law. We need all of these things as legal provisions.
The PJ Nayak committee had raised concerns on governance in public sector banks. What's your view?
Corporate governance has to come in many ways. The fact of the matter is that the quality of board members has to improve, though I must say it's not an issue as far as SBI is concerned. The selection process of top management should ensure that people who are coming in should come for a specific period of time. If they come for too short a period, they cannot really implement any long lasting changes. To the credit of the government, I must, say they have already thought of these things.
There is a thinking about lateral entry in the top positions of SBI. Do you think that is required?
Movement of that nature unless there is a logic to it, makes no sense. SBI has a large number of subsidiaries/associates and all of us get a stint to work as number one in some subsidiaries before becoming the chairman. So, we do have the feel of the market as well as an outside view. If a person is coming from outside, then he or she should get five to seven years term as chairman to allow him some space for some kind of learning curve. I am an SBI insider; even I needed some time to get adjusted after coming to this chair.
