'Efforts on to limit bad assets'

Q&A: O P Bhatt, Chairman, State Bank of India

SBI Chairman OP Bhatt spoke to mediapersons at a press conference to announce the bank’s results. Excerpts:

What kind of credit growth do you see in the fourth quarter and in the current financial year?
There is a pick-up in credit demand and the bank expects to disburse Rs 25,000-30,000 crore in January-March.

For the current financial year, credit growth in estimated at 19 per cent.

Do you see any decline in cost of deposits and improvement in the net interest margin in the fourth quarter?
While the deposit rates will not go down further, the cost will continue to decline to around 5.80 per cent. The cost of deposits for the third quarter was 6.06 per cent. The net interest margin will improve to rise over 2.80 per cent from 2.56 per cent for nine months ended December 2009.

Does the bank plan to raise capital through an equity offering?
Our discussion with the government is on. Nothing is on the anvil in this financial year. The government, which is facing a large fiscal deficit, may not be in a position to subscribe to the equity offer this year. Next year, the bank will look to raise up to Rs 20,000 crore through an equity issue. Our first preference is rights issue, out of which the government could subscribe to 60 per cent in line with its stake.

When do you see bad assets peaking?
Though the economy is recovering, the non-performing assets (NPAs) may rise further because the asset quality will improve only with a lag effect. Slippages will peak in the June quarter. We expect about 10 per cent of our restructured assets to turn bad, but we are not much concerned about the asset quality. It will be difficult for us to bring down the net NPA ratio by March, but efforts will be there to keep them at the same level by the year end.

How much more capital do you need to reach the 70 per cent provision coverage ratio (PCR)?
We are at 56 per cent now. We will need around Rs 3,000 crore to reach the 70 per cent PCR, which we aim to attain by September. We have also applied to RBI for extending the September deadline for the 70 per cent PCR.