You are here: Home » Economy & Policy » News » Demonetisation
Business Standard

Note ban has and may continue to result in a slowdown, warns SBI

Also says that note ban's impact could adversely affect its business

Topics
Demonetisation

Press Trust of India  |  New Delhi 

Demonetisation, currency, notes
.

The country's largest lender, the State Bank of India (SBI), has expressed apprehensions that may continue to result in slowing down of the economy and adversely affect its business.

The government had discontinued Rs 500 and Rs 1,000 banknotes from November 9, 2016, and issued new Rs 500 and Rs 2,000 currency notes in exchange for the discontinued ones.

The long-term impact of this move on the Indian economy and the banking sector is uncertain, SBI told institutional investors prior to its Rs 15,000-crore share sale through private placement.

The effects of India's recent decision are uncertain, which may adversely affect the bank's business, results of operations and financial condition, the bank said in the Preliminary Placement Document to investors while flagging the 'risk factors'.

"The has and may continue to result in a slowing down of the Indian economy, which may adversely affect the Bank's business," it said.

The document, SBI had said, contains forward-looking statements that involve risks and uncertainties. Further, the financial performance may differ from "such forward-looking" statements as a result of certain factors.

Post-demonetisation, there has been a surge in the current and saving accounts (CASA) deposits of banks.

According to a Reserve Bank of India report, the sharp increase in the share of CASA deposits in aggregate deposits by 4.10 per cent to 39.30 per cent (as of February 17, 2017) resulted in a reduction in the cost of aggregate deposits, and banks have correspondingly lowered their term deposit rates.

As a result, the bank may face increased competition from commercial banks and other lending institutions, it said while highlighting the risks associated with demonetisation.

SBI said increased competition may have an adverse effect on the net interest margin and other income and, if the bank is unable to compete successfully, its profitability may decline.

"The move could also result in an increase in compliance costs and higher incidents of fraud. Any one or more of these events, if and when they occur, could have a material effect on the bank's business, results of operations, financial conditions as well as reputation," the document said.

Post the merger of its five associate banks and the Bharatiya Mahila Bank, effective April 1, SBI catapulted into one of the top 50 global banks (up from the 55th position in 2016).

Its balance sheet size is Rs 33 lakh crore and it has 24,017 branches and 59,263 ATMs servicing over 42 crore customers.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Mon, June 12 2017. 10:50 IST
.