Any more interest hike not good for growth, says SBI chief

CHENNAI: With the RBI on Tuesday unveiling the credit policy which is expected to signal hike in interest rates, State Bank of India Chairman Pratip Chaudhuri today said increase in rates could lead to "derailing" of growth.

"...inflation is something like 8 per cent plus and an increase in very high rate can have a danger of derailing the growth prospects," Chaudhuri told reporters here.

However, he said that while balancing between the growth and inflation was not easy, "RBI will do something very optimum from both ends."

At least a 25 basis points increase in key policy rates, at which RBI borrows and lends to commercial banks, is expected by analysts in the wake of inflation staying at levels much above the government's estimates.

Chaudhuri said that his bank is not in favour of deregulation of savings bank deposits, but there should be adequate incentives for saving bank deposits.

"We are not in favour of deregulation but adequate incentives for saving bank deposits. We will go along with whatever the Reserve Bank of India prescribes," he said.

Savings bank account now attracts 3.5 per cent per annum calculated on a daily basis.

Commenting on the bank's plans to merge with its associate banks, he said, "We are still in the process of absorbing State Bank of Indore... We are not under pressure or in any urgency that the merger should happen tomorrow or day after.

The need to merge is well established as it will bring in the synergies and deduplication".

On the proposed rights issue, Chaudhuri said they were still holding dialogue with the government.

"We are talking to the Government because the total amount required as fund is quite substantial. Since we need upward of Rs 10,000 crore, government needs to make sure what will be the source and what will be the modality", he said.

The country's largest bank has also set up a new vertical to reduce bad debts.

"We have created a new vertical -- the Stress Asset Management Group. We are using more technology and are deploying more resources for recovery of bad debt. We are also trying to improve the quality of the origination of our loans," he said.

Chaudhuri was here to present a cheque of Rs 18.50 lakh to The Leprosy Mission Trust India for reconstructive surgery under the Corporate Social Responsibility initiative.

The move was taken in tandem with an awareness campaign on leprosy treatment in association with Rotary International District 3230 and Rotary Club of Guindy.

Source: EconomicTimes