India’s largest lender, State Bank of India (SBI), will need Rs 30,000 crore to Rs 40,000 crore over the next three years to maintain balance sheet growth and capital adequacy norms.
“We are planning for next three years. It will be about Rs 30,000 crore-40,000 crore” SBI Chairman Pratip Chaudhuri told reporters on the sidelines of BANCON 2011. He also said the government had already committed Rs 4000 crore capital infusion for the bank.
He said the bank's capital requirement would be partly funded by its shareholders including the government, the rest would be managed through internal accruals and economising capital usage.
Chaudhuri did not comment on how the bank planed to raise these funds.
“The options will be discussed and decided by the government, whether it will be preferential allotment or rights issue,” he said.
He said the bank was not worried over its loan exposure in the power and aviation sectors. Chaudhuri reiterated the bank was not in a hurry to revise its savings deposit rate.
On the strike called by SBI employee unions, he said while the bank's financials would not have much impact, it will severely affect the lender's service quality. “Loss will not be much in rupees or paise but in terms of customer service. It is an unfortunate issue. Negotiations are going on and we hope the strike will not happen."
SOURCE: http://www.business-standard.com/india/news/sbi-needsto-rs-40000-cr-in-3-yrs-says-chairman/454658/ � a n x o �s rnly high despite the series of rate hikes by the central bank. Inflation is hovering around the double-digit mark for the last 20 months. However, both RBI and Rangarajan expect inflation to start easing from December-January and come down to seven per cent by March. A cumulative rate tightening of 375 basis points since March 2010, however, has slowed economic growth. It also prompted the central bank to signal a pause.
Rangarajan, a former RBI governor, said the government should make all possible efforts to keep the fiscal deficit at the budgeted level and consider deregulation of petroleum prices once inflation starts slowing. “We cannot let domestic prices not reflect international crude prices,” he said.
BANKS’ CAPITAL NEEDS
Availability of capital may limit public sector banks' credit expansion in the coming years, Rangarajan said.
“Given, the current government policy of no stake dilution below 51 per cent, capital for public sector banks will have to come from the government budgets, banks' own resources and public issues. The availability of capital through budget sets a limit on the extent of expansion of credit by these banks."
The government has budgeted Rs 6,000 crore capital infusion in public sector banks in this financial year after injecting Rs 20,157 crore in 2010-11.
But Rangarajan feels the government will have to bring in Rs 4,000 crore -10,000 crore supplementary demands for grants to meet capital requirements of banks. “A long-term programme of injecting capital into public sector banks will have to be drawn up. Otherwise, the market share of public sector banks will have to come down and the slack will have to be taken by existing and new private sector banks,” he said. On Friday, Namo Narain Meena, minister of state for finance, said the government had approved Rs 14,000 crore capital infusion in state-run banks in 2011-12. Banks had asked for Rs 18,000 crore capital.
ASSET QUALITY
Rangarajan warned non-performing assets on banks' books might rise this financial year because of high interest rates and slow economic growth.
“The Indian banking system is also exposed to some sectors of the economy such as power and aviation, which are not doing well. Non-performing assets in these areas will need continuous watch by banks,” he said.
Banks should also be cautious of liquidity risks that may expand because mismatch in maturity of assets and liabilities. “Increased exposure to real estate and infrastructure will lengthen the maturity of bank assets.”
He added banks should improve bad loan recoveries and operational efficiencies, as deregulation of savings deposit rates, new capital rules and financial inclusion obligations would keep the lenders’ profitability under pressure.
+1.jpg)
0 comments
Post a Comment