Loan growth: Elephant racing faster than the system, says SBI Chief
The State Bank of India (SBI) may not be as aggressive and raise interest rates to get rid of deposits as it still has a surplus in the SLR to the extent of close to $4-lakh crores, which can be leveraged to support credit growth in FY24. .
In FY24, India’s largest bank expects its deposits and loan book to grow by about 9 percent and 12 to 14 percent, respectively.
Chairman Dinesh Kumar Khara likened the bank’s FY23 loan book growth of 15.99 per cent (against the banking system’s 15 per cent growth) to “the elephants racing faster than the system”.
on the deposit front
When it comes to deposits, Khara told analysts, in fiscal ’23, the SBI saw the cost of deposits increase to the order of about 16 basis points, most of which comes in the last quarter. One basis point is one hundredth of a percentage point.
“We’ve seen from the last quarter to date, about 9 basis points increase (in the cost of deposit). Whether we want to support that kind of credit growth, we’re going to be asked to go all out for more deposits, maybe not.”
The reason behind this is that the Bank still has a surplus in SLR (includes Government Securities and Government Development Loan) to the extent of around ₹ 4 crore.
Khara emphasized that the bank can always dump the SLR and support loan book growth.
“We have increased the deposit interest rate mainly because we always understand that deposit is a privilege and, as far as possible, we will take care of the interests of the depositor provided that the total cost of resources does not go up too much. Therefore, we have enough space, it is always available and we try to calibrate the deposit interest rate within elbow room,” he said.
Responding to an analyst’s question about the impact of a potential rate-cutting cycle on the bank in the future, Khara noted that “when the rest of the market was increasing deposit rates, the SBI did not raise rates…we have remained calm.”
When it comes to interest rates, the SBI chair noted that even if they go down, the bank will not be required to lower the interest rate on deposits because it has not raised it to the maximum level.
“We still have some elbow room there. So, we won’t be required to lower our (deposit) interest rate. So, the picture you see today is probably going to stay,” Khara said.
Referring to SBI loan book growth of 15.99 percent versus banking system growth of 15 percent, he said, “People talk about dancing elephants. The elephant is racing, racing faster than the system, it’s not just dancing. So, I think the kind of potential Which we have you must keep an eye on.”
Green or black deposit
Responding to a question on the “RBI Framework for Acceptance of Green Deposits”, the SBI Chair noted that whoever puts money into green deposits expects better returns and where the Bank wants to lend from the proceeds of such deposits, concessions should be granted.
So how do you really achieve that balance? I think it (framework) is likely to settle over a period of time, regardless of the color of the sediment, green or black. Whatever the color of the deposit, the opportunities will be supported.