SBI voices concern on inflation, credit growth

State Bank of India, the country’s largest public sector bank, does not expect an immediate cut in interest rates and Cash Reserve Ratio, as inflation is still high and liquidity at a comfortable level.

“A CRR cut is in the wish list for every bank. Any time when CRR is cut, banks add to their bottom line. But if liquidity is the determining criterion, then I do not see a CRR cut today,” said managing director and chief financial officer Diwakar Gupta on the sidelines of a CII seminar.

Inflation, measured on the basis of the wholesale price index rose to 7.55 per cent in August, driven by higher prices of potatoes, wheat and pulses, which rose due to poor rainfall. “Inflation is continuing to rise. In such a situation, how can a monetary authority reduce interest rate, without any indication of inflation coming down?” said Gupta.

Meanwhile, credit growth was not keeping pace with deposit growth. “Credit growth is lagging deposit growth significantly. In the last five months, we have seen a deposit growth of about Rs 75,000 crore, while the credit growth was only Rs 15,000 crore,” said Gupta.

And, non-performing assets are the biggest source of concern for the banking sector, he said. “ For us, it is the only source of concern. The problem is outside the banking industry. The problem is (sometimes) outside borrowers’ control. Low demand, inability to pass on the rising input costs, low profitability and delayed receivables are some of the factors contributing to this situation. We hope our asset quality will improve in the coming quarters,” he added.

SBI expects a net interest margin of 3.7 per cent and credit growth of 18 per cent for the whole year.