‘Lending rates can be lowered if the cost of borrowing for banks comes down’

State Bank of India (SBI) Chairperson Arundhati Bhattacharya on Tuesday said that the blame for bank’s non performing assets (NPAs) was not limited to them. All the stakeholders, including promoters, government, lenders and even the regulators are to blame, Ms. Bhattacharya said.

“Promoters were bidding aggressively riding on the back of good times around 2007-08 and some of them were diverting funds out of the well-run units hoping the money flow would continue forever,” Ms. Bhattacharya said. The banks, she said, extended loans for long duration, as much as 30 years, while hoping the funds would be recovered in 10 years or so. While the regulator is to blame for allowing such a dispensation, the government was to take the blame for policy uncertainty like cancellation of telecom licences, she said.

Ms. Bhattacharya was delivering the ASSOCHAM Foundation Day Lecture here. She allayed concerns that the banks reeling under the stressed assets might be inadequate capitalisation and said that SBI and several other public sector banks were planning to divest non-core assets in order generate the funds required to meet the Basel III norms. Earlier, SBI had announced plans to lower its stake in insurance ventures–SBI Life Insurance and SBI General.

“One thing I would like you to be assured about is that there is a lot of thought going into it and the banks will be capitalised enough in order to have good capital to support the economy,” she added.

As part of the Union Finance Ministry’s ‘Indradhanush’ package of Rs 1,80,000 crore, the Government will capitalise the PSU banks to the extent of Rs 70,000 crore. Individual banks are expected to raise own their own the balance Rs 1,10,000 crore.

The SBI chief also allayed apprehensions that the journey towards the global banking norms would raise the cost of borrowing.

In response to a question about potential competition banks’ business going forward from the entry of payment gateways, Ms. Bhattacharya said: “We have no intention of vacating that space…We will leverage it to the hilt”. She said SBI’s legacy of 209 years makes it trustworthy for small and retail customers, which the new payment gateways would not have.

SBI, the country’s largest bank, is opening 70,000 accounts per day through 54,000 Customer Service Points (CSPs) outside the bank branches, operated through channels like the fertiliser dealer or grocery stores. The CSPs are being equipped to sell banking, insurance and pension products.

SBI’s multi-pronged strategy to deal with the problem of stressed assets and non-performing assets, she said, includes plans for launching a platform along with the Small Industries Development Bank of India (SIDBI) and the National Stock Exchange (NSE), in about a year, for discounting of bills by traders. The initiative would not only help the traders but also help the bank to reduce the NPAs, she said.

On China, Ms. Bhattacharya said that the country has “abundant reserves to capitalise the banks with a swift China would not have a hard landing”.

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Printable version | Nov 28, 2021 11:50:10 AM |

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