The State Bank of India (SBI) chairman Rajnish Kumar has clarified that the bank would continue lending to the non-banking financial companies (NBFCs).
Kumar’s comments came after NBFC stocks witnessed heavy selling pressure on Friday amid crisis at the Infrastructure Leasing and Financial Services Ltd (IL&FS).
“Their lines are available, this is a regular process. The way it works is that banks will have sectoral exposure limits and for SBI, I can confirm(assure) you that the headroom is available as per our sectoral exposure limits. We have individual exposure limits which are as per the regulatory guidelines and bank’s own risk framework. We are holding a very diversified portfolio without any concentration risk … the concerns on NBFCs because of IL&FS- I think there is an extreme reaction which is totally unwarranted because NBFCs operate in different segments,” said Kumar.
“Loans and bond markets – more or less the pricing has become at par and there have been upward movements in the interest rates. Banks have also increased their MCLR. In SBI we have increased our MCLR by 45 basis points (bps) since January. The cost for the borrowers has also gone up correspondingly because all our loans are linked to MCLR,” he added.
On liquidity concerns, the chief said, “As far as liquidity is concerned, SBI is sitting on a fairly good liquidity. Our liquidity coverage ratio is 140 percent. From January 1, the requirement is 100 percent. The CD ratio of SBI as of now is 66.5 percent. When there is a tax payment around the middle of the month, always for a few days, there is a tight liquidity and as the tax is paid, it comes back to the banking system, the liquidity position eases.”