SBI to tap capital markets if loan growth improves

Plans on merger of associate banks on back burner, says chairperson

State Bank of India (SBI),  the country’s largest bank, might hit the capital market if loan growth exceeds 15 per cent.

Chairperson Arundhati Bhattacharya said on Friday that with the new government in power, in the next few months the capital markets should open up and the working capital cycle was expected to shorten.

“We started this year with growth of 15-16 per cent. We expect to continue the growth. If we need to grow beyond 15 per cent, we will see how to tap the domestic capital market. We will need more equity,” she said.

The bank would go for either a rights issue or a follow-on offer, after discussions with the government, she added.

In 2013-14, the bank saw 15 per cent growth in advances on a year-on-year basis. Much of this came from the large corporate sector, which saw growth of nearly 38 per cent over a year.

“There are expectations that (growth in) GDP (gross domestic product) should improve. It should lead to a better asset quality. Also, it takes at least two quarters for the actual growth to show,” said Bhattacharya.

Meanwhile, the bank has put the merger plans of associate banks on the back burner. Instead it will focus on streamlining of personnel issues, she said. In the past year, SBI’s staff expenses rose nearly 22 per cent.

“In the associated banks, the HR (human resource) practices are different. So, we have put the plans of merger on the back burner for a while,” she said.

SBI says it has put a robust risk mitigation mechanism, whereby it has incorporated risk management officials in credit committees. This apart, an online system has been put up for concurrent auditors to check portfolio quality-related issues on a real-time basis. The bank will also do an early review of small-size loans. “We are looking at product-wise data analysis. We will also use a professional study for operating risk-related issues,” she said.

Mallya as ‘wilful defaulter’
SBI, which has an exposure of Rs 1,600 crore to grounded airline Kingfisher, on Friday said it is exploring ways to declare the carrier’s promoter Vijay Mallya as a wilful defaulter, said a PTI report. According to RBI norms, it would have to be proven that the borrower had diverted funds taken from the bank and not paid up despite having the ability to pay.