SBI slashes domestic term deposit rates

Mumbai, September 5: Amid a dry pipeline of loans and challenges in managing excess cash, State Bank of India on Wednesday reduced interest rates on domestic retail term deposits by 50-100 basis points. The bank said the revision in rates was for deposits of up to five years. The new rates would be effective from Friday.
For deposits of up to Rs 15 lakh, the new rate for a period of 241 days to less than a year was 6.5 per cent (the previous rate was 7.5 per cent), while that for a period of a year to less than two years was 8.5 per cent (earlier nine per cent), according to a statement by the bank.
Chairman Pratip Chaudhuri said the bank had huge surplus funds and very few proposals for loans. “From April 1 to August 31, our deposits increased by Rs 78,000 crore, while credit growth was only about Rs 20,000 crore. Second, the pipeline for loan growth, particularly for large credit, is rather dry. That is why we decided to go slightly slow in deposit mobilisation, because there doesn’t seem to be enough utilisation of the deposits. And, if we hadn’t done that, it could have affected margins.”
However, he said this might not lead to reduction in the base rate. “This is only to slow deposit mobilisation,” he said, adding the impact of Wednesday’s rate cut on the cost of funds would come with a lag, as it would only apply to new deposits.
At the end of June, SBI’s cost of deposits stood at 6.24 per cent, compared with 5.66 per cent a year earlier. While the yield on advances was 10.86 per cent, compared with 10.43 per cent in the year-ago period, net interest margin was 3.57 per cent, against 3.62 per cent a year earlier. Chaudhuri said with the revision in deposit rates, the incremental growth in deposits may turn slow. SBI’s retail term deposits rose 25 per cent to Rs 4,36,976 crore in the year ended June, while total deposits rose 16 per cent to Rs 11,02,926 crore.
For short-term deposits of 91-179 days, the new rate is 6.5 per cent (earlier seven per cent). For 180-day deposits, the rate has been revised from seven per cent to 6.5 per cent, and for 181-240 day deposits, the new rate is 6.5 per cent (7.25 per cent earlier). On reviewing credit growth estimates, Chaudhuri said, “We have not yet revised (lowered) the credit growth target for the current financial year. We are still looking at 18-20 per cent growth. The first quarter is generally slow. The consumer segment is accounting for credit demand. The industrial and commercial segments are very slack.”

Seek more time to repay corporate loans: SBI

Kolkata, August 29: “The other day, we received a (loan) proposal for setting up a hotel, with a repayment period of eight to nine years. I told my officers ask this gentleman to take the loan for 12-13 years...Our advice is in the future, whenever you are applying for a loan, try to negotiate for a longer repayment tenure,” said Chairman Pratip Chaudhuri.

Such advice is aimed at capping a further rise in the bank’s restructured loan portfolio. In 2011-12, SBI’s restructured loan portfolio nearly doubled to Rs 8,093 crore from Rs 4,979 crore a year earlier. In the quarter ended June, the bank restructured loans worth Rs 564 crore. At the end of June, SBI’s total restructured loan portfolio stood at Rs 36,904 crore. Of these, loans worth Rs 7,373 crore were classified as non-performing assets. The Reserve Bank of India (RBI) has proposed tough norms for loan restructuring, and if the new rules are implemented, the provision burden on the bank would rise, eroding its profitability further.

Chaudhuri added SBI would not penalise its borrowers if they wanted to pre-pay loans ahead of the repayment schedule. “In the current scenario, with the rules RBI has proposed, it is difficult to increase the tenure after the loan is sanctioned. It would increase the burden on the bank. So, we are telling our customers to negotiate for more time. If one is able to repay ahead of the schedule, it is fine — there would be no penalty for pre-payment,” he said.

However, most banks were reluctant to agree. “The repayment period is based on the projected cash flow. The schedule is fixed after making a conservative assessment of the earnings, and taking into consideration the risk factor. We have no immediate plans to deviate from this practice,” said the chairman and managing director of a Mumbai-based public sector bank, requesting anonymity.

Slippages worth Rs 3000-4000 crore to be reversed by Q3

Mumbai, August 10: When it comes to earnings, India‘s largest lender State Bank of India has nothing much to brag about. For the quarter ended June 2012, the public sector bank posted a lower-than-expected 15% growth in revenue, but deterioration in asset quality caused the major damage. SBI saw bad loans spiked 4.99% to Rs 7,000 crore in the first quarter of FY13, much higher than street estimates. Net non-performing assets also saw a jump to 2.22% from 1.82% quarter-on-year. This rise spooked investors, who dumped the stock causing it to fall nearly 4.5% to Rs 1,887.

Chairman Pratip Chaudhuri is confident that the bank will be able to reverse this situation in the coming two quarters. “As companies restructure their finances and reschedule their liabilities, we think crore Rs 3,000-4,000 crore out of the Rs 7,000 would revert back to standard category in the second quarter itself or by the third quarter,” he said in an interview to CNBC-TV18. He further adds that the slippages came in towards the end of the quarter, due to which they did not have enough response time.

On the positive side, SBI has reported only Rs 562 crore of restructured assets in the quarter, which takes its restructured book to Rs 37,000 crore. Going by historical data, only about 3% of the restructured books become losses. “So with our restructured book about Rs 37,000 crore, I think in the worst case scenario the possible loss should not be more than about Rs 1,000-1,100 crore,” said Chaudhuri. He goes on to say that restructured accounts should not increase going forward, except for in the power sector.

SBI plans focused services for Mid-Corporates

Hyderabad, August 3: State Bank of India is planning to provide more focused services for the mid-corporate group. It will be using its asset management team to provide these services, the bank’s Chairman Pratip Chaudhuri said.

Under the revised arrangement, the bank’s relationship manager would be part of the appraisal and assessment process, which is expected to shorten the time taken for loan approvals.

The proposals will then be examined by an independent committee from the risk-mitigation angle and be awarded an internal rating. These will then be submitted to the credit committee for sanction. The SBI Chairman met a cross-section of its customers here on Friday, explaining the bank’s services to the corporate and retail sectors.

SBI plans focused services for Mid-Corporates

State Bank of India's asset quality improving: Chairman

Mumbai, July 27 (Reuters) - State Bank of India's asset quality is improving compared to last year, Chairman Pratip Chaudhuri said on the sidelines of a news conference after announcing its $1.25 billion bond issue. He did not give any further details citing a silent period ahead of the earnings. India's biggest lender will post April-June quarterly results on Aug. 8, Chaudhuri added.

The comments came after SBI shares slumped as much as 3.8 percent on Friday as a rise in non-performing assets at Punjab National Bank and Union Bank sparked concerns about asset quality in the government-run banking sector.