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Wednesday, April 27, 2011

SBI may not raise rates immediately: Chaudhuri

State Bank of India (SBI) Chairman Pratip Chaudhuri on Tuesday said a rise in policy rates by the Reserve Bank of India (RBI) may not immediately lead to a rise in the bank’s interest rates. “We are not contemplating an immediate rise as of now. If there is a rise of 25 basis points in the monetary policy, it would not hit us immediately...normally, we keep money with RBI. So, if there is a rise, we would be the beneficiary,” he said. He, however, added if the rise exerted upward pressure on the cost of funds, the bank would review its interest rates.

The bank also dropped its plans of acquiring a bank in Indonesia and said it would now concentrate on opening a subsidiary in Australia. The bank also plans to merge either State Bank of Patiala or State Bank of Hyderabad with itself by early next year. After a meeting of the chairmen of various public sector units and financial services secretary Shashikant Sharma, Chaudhuri said SBI was in talks with the Centre on an infrastructure debt fund and that the proposal of floating the fund with seed money of Rs 300 crore was quite inadequate.

On dropping its acquisition plans in Indonesia, Chaudhuri said, “Right now, we are not pursuing the Indonesian plan. It is not working out because the prices which we have to pay are very high. It is three times the book value.” SBI had earlier said it was on the look-out to acquire a bank in Indonesia in a cash deal not exceeding $100 million.

Chaudhuri also said the bank needed a greater trust on regulatory framework in Indonesia before acquiring a bank. According to Indonesian laws, an acquirer can take over only those banks in which the owner or majority stakeholders exit from the acquired bank completely and the entity is merged.

“Right now, we are right focussing on Australia (through a subsidiary), because it is a clean market. The capital requirements for a subsidiary are not very stiff,” he said. According to Chaudhuri, unless a bank had a subsidiary, it couldn’t mobilise retail funds and acquiring a bank was not logical since it had to spend on premiums. SBI has 125 foreign offices spread across 23 countries including Singapore, USA, Canada and Mauritius.

On the merger of its associate banks with SBI, Chaudhuri said two of them were fully owned —- State Bank of Patiala and State Bank of Hyderabad —- and that any one of these would be merged. “The next bank would possibly be one which is fully owned because it takes some time to digest a bank. May be in a year from now. It may not happen this financial year. However, the preparatory process would start this year. The deal may materialise sometime early next year,” he said.

On base rate, Chaudhuri said if SBI kept raising the base rate, it would go against the market trend. “There is urgency for us to remain competitive,” he said. Currently, SBI’s base rate is 8.5 per cent.

Chaudhuri defended the discontinuation of teaser rates for home loans, saying RBI had not dilutes its provisioning norms. He asserted his predecessor O P Bhatt would have done the same thing, since the business model had to change under different regulations. “Bhatt was in SBI and not SBI himself,” he said.

The SBI chairman also said a rights issue was likely in the current financial year. However, the government would first infuse capital in small banks which required Rs 500 crore or Rs 1,000 crore. Since SBI’s rights issue was worth Rs 20,000 crore, the government had to apply for around Rs 12,000 crore to retain its stake of over 59 per cent.

On holding companies, Chaudhuri said nowhere in the world did the concept of one holding company for all financial subsidiaries work. However, RBI’s thinking was way ahead of the times, he said.

Source: Business Standard


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