SBI needs Rs 7,900 cr by Mar 2012: MD

A day after the government indicated that it would inject capital into State Bank of India, its managing director and chief financial officer Diwakar Gupta said the country’s largest lender would need Rs 7,900 crore by this finacial year end to maintain eight per cent tier-1 capital adequacy.

Though Reserve Bank of India mandates six per cent tier-1 capital for banks within the overall capital adequacy ratio (CAR) of nine per cent, the government wants to ensure that the public sector banks have a tier-I capital of eight per cent.

At the first quarter end this year, the bank’s tier-1 CAR was 7.6 per cent.

The Mumbai-headquartered bank, Gupta said, was open to options like private placement, rights issue, follow on offer and global depository receipt (GDR) for raising tier-I capital, said Gupta.

“We would need Rs 7,900 crore for maintaining eight per cent tier-1 capital by March 2012, if the credit growth is 16-17 per cent,” Gupta said here, on the sidelines of a Confederation of Indian Industry Banking Colloquium.

The bank, Gupta said, would require Rs 17,000 crore in one year, Rs 25,000 crore in three years and Rs 40,000 crore in five years, to maintain the central bank’s prescribed requirement.

NET INTEREST MARGIN
Despite a rise in cost of credit, SBI expects to maintain a net interest margin of over 3.5 per cent in the second quarter as well as for the whole year.

“We had given a guidance of maintaining our margins at 3.5 per cent this year,” Gupta said. “We have shown a healthy growth in NIMs so far and hope to do better than what we had targeted.”

The cost of deposits is not likely to rise over the next few months so the margins will be higher on account of rising yields on advances, he added.

MONETARY POLICY AND CORPORATE DEFAULTS
Rising interest cost was hurting profit margins of corporates, and there was a rising trend of corporate defaults, said Gupta.

“There is a rising trend in mid-corporate defaults and large SMEs and in some cases big corporates. Some amount of slippages in short term is possible,” he added.

The RBI will present the monetary policy on October 25.

“Inflation is not yet under control according to official statement,” Gupta said. “We should expect some more monetary tightening, but as an operational banker, I am also worried about the credit portfolio of banks.”

However, SBI will desist from rising interest rates. “We want to keep rates as much under control as we can as credit is already very expensive,” Gupta said.