Excess liquidity a matter of concern: SBI

State Bank of India (SBI) Chairman O P Bhatt today said that excess liquidity available with the bank would be a matter of concern for the next two quarters.

"Going forward excess liquidity will be a matter of concern for the next two quarters and this would put pressure on the margins. However, that pressure is declining," Bhatt told a press conference.

Excess liquidity is a problem because if banks receive more in deposits than they are giving out as credit, their earnings (that they would have earned from loans) come under pressure, affecting overall margins.

Bhatt said the CRR hike--money banks need to park with the RBI--was on expected lines and even after sucking out Rs 36,000, would leave twice as much liquidity in the system.

However, he was hopeful credit offtake would pick up in the near-term as the economy improves.

Credit advances made by SBI are higher than the industry average, and the bank is hopeful of achieving 18 per cent growth by the end of the fiscal, Bhatt said.

Regarding the gross NPA, he said the bank would try to contain it at 3.11 per cent.

On interest rates in the short haul, Bhatt said although the cost of funds would go up by a few basis points, there was no case for increasing interest rates.

On the merger of State Bank of Indore with SBI, Bhatt said the bank had already given its recommendation to the government. He said since the government gave the approval, the merger would be completed within this fiscal.

Bhatt said the bank was planning to raise Rs 40,000 crore to Rs 50,000 crore for the next five years.

SBI was also in the process of talking to international partners for its foray into wealth management business. Wheather it would be done through a joint venture or as a separate division in the bank is yet to be chalked out.

He said as a result of calculation of savings interest rate on daily basis, the effective interest rate would go up by 60 to 70 basis points.

Towards financial inclusion, Bhatt said SBI would open 60 lakh no frills accounts and 500 ATMs in rural areas.