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Interview: SBI has ₹4 lakh crore worth of loan proposals in pipeline, says Chairman Dinesh Khara
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Speaking to CNBC-TV18, Dinesh Kumar Khara, Chairman of SBI said that the bank will support its loan growth by clawing back some profits. Khara added that the Reserve Bank’s project finance draft is not a cause of worry for the bank.
The State Bank of India (SBI) announced its financial results for the fourth quarter on Thursday, May 9. The state-owned lender’s profits rose by 24% over the previous year, far above street estimates.
Net interest income (NII) inched up by more than 3% year-on-year, while asset quality improved, and advances in deposit growth were positive as well.
Speaking to CNBC-TV18, Chairman Dinesh Kumar Khara stated he expects growth in advances to continue.
He added that SBI has ₹4 lakh crore worth of loan proposals in the pipeline.
Khara also discussed the bank’s stance on RBI’s draft project financing rules.
Here are the edited excerpts:
Q: SBI’s advances growth looks strong, at 5% sequentially. What target do you have for FY25 considering your pipeline, both in the private and government sectors?
A: We anticipate similar trends in advances growth, around 16%, across corporate, SME, retail, and agriculture sectors. The GDP growth outlook supports this confidence. Capacity utilisation has improved to 35%, and working capital facilities have increased by over 10%. Additionally, our unavailed term loans decreased to about 18%. These factors, coupled with a pipeline of ₹4 lakh crore worth of proposals, indicate promising growth for the current financial year.
Q: Your capital adequacy stands at 14.28%, comfortable for a ₹37 lakh crore book. What growth rates can this level of capital support, and when might you consider raising equity?
A: With our current capital adequacy, we can support a growth of up to 20%, equivalent to ₹7 trillion. However, we’ll monitor capital requirements closely, ensuring our Return on Equity (ROE) exceeds loan book growth. We plan to raise tier-I capital this year and may consider further capital raise if needed, though profit plough-back remains a viable option.
Q: Deposits have grown by over 11% year-on-year this quarter. Do you expect this growth rate to continue?
A: Term deposits grew by about 16%, largely due to increased interest rates introduced in October. We anticipate sustained deposit growth and aim to enhance it further through strategic actions in savings and current accounts.
Q: Despite the size of your book, gross slippage remains relatively low. Where do these slippages originate, and do you foresee improvement in FY25?
A: Slippages mainly stem from agriculture and SME sectors. Of the ₹3,886 crore slippages in the last quarter, we’ve already recovered over ₹886 crore. We aim to maintain tight control on slippages going forward.
Q: You closed the year with recoveries and upgrades exceeding ₹11,400 crores. What are your expectations for FY25, especially regarding recovery from large accounts?
A: FY25 may see a slight reduction in recoveries due to fewer high-value accounts in our NPAs and AUCA book. However, we’ll leverage all resources to maximize recovery efforts.
Q: Considering the current deposit cost plateau, do you foresee maintaining or expanding current margin levels?
A: Market uncertainties necessitate cautious underwriting to ensure asset quality. While I refrain from over-committing, our focus remains on prudent management to sustain or enhance margin levels.
Q: Regarding RBI’s draft proposals on project finances, what impact do you foresee on SBI, especially in terms of additional provisioning?
A: The 5% increase in general provisions, if implemented, will likely be phased over three years, providing adequate adjustment time. While the discussion is ongoing, we’re not overly concerned about its impact.
Q: Some stakeholders suggest these guidelines might affect sentiment around project financing. What’s your view on RBI’s approach?
A: Lenders must account for risk premiums adequately to avoid adverse outcomes. Mindful pricing should mitigate concerns surrounding project financing.
Q: You mentioned areas of improvement for SBI. Can you elaborate on these and what to expect for FY25?
A: Efforts to strengthen the CASA ratio are underway, focusing on supporting savings and current accounts. Initial progress is promising, and we aim to harness the collective energy of our branch network to drive deposit growth.
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