#SBI Q3 results: Profit falls 35.4% on one-time pension provisions.
Chairman Dinesh Khara discusses earnings and more, in conversation with Mimansa Verma. #Q3WithNDTVProfit
Read: bit.ly/3UwO9wt
Chairman Dinesh Khara discusses earnings and more, in conversation with Mimansa Verma. #Q3WithNDTVProfit
Read: bit.ly/3UwO9wt
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TVTranscript
00:00 Hello and welcome. We are here at the SBI's Q3 earnings event and in a special conversation
00:05 with Mr. Dinesh Khara, Chairman of SBI. Thank you so much, sir, for taking out time for
00:10 us. So my first question to you is about the CAPEX push that Finance Minister Nirmala Sitharaman
00:18 has spoken about in the interim budget, which means that the private CAPEX will also follow.
00:23 So what is your visibility on that and as things stand off now, companies are actually
00:30 raising funds on their own through bonds and pushing that. So how soon are you expecting
00:34 that to come to banks and what is the visibility on that?
00:38 Yeah, thank you very much for this opportunity and the way I look at the situation is that
00:45 we are having a very clear visibility in terms of the pipeline which we have and that is
00:51 nothing but a reflection of the confidence of the private sector players, which is of
00:55 course fuelled by the initiatives taken by Government of India in terms of supporting
01:00 the infrastructure. We have seen it in the past and now we have got a situation where
01:06 our pipeline stands at about 4.6 trillion Indian rupees and I would say that much of
01:13 it, almost about 75% of this pipeline is coming from the private sector and the remaining
01:20 25% is coming from the public sector. But yes of course, it's a huge multiplier, it
01:26 has got a huge multiplier effect and that is something which we have already started
01:30 seeing when we see our SME growth at about 19%, I would say that is a reflection of the
01:36 kind of multiplier effect which is seen of such kind of investment.
01:40 You have also spoken about the credit demand that is going to come in the renewable sector.
02:07 Normally we are all aware that such kind of renewable power, solar power projects have
02:13 got a plant load factor of about 25% only. So when we are appraising these projects we
02:19 are very mindful about this and also the kind of rates which are given, they are given by
02:23 SECI and those rates are invariably there are contracts which are entered into. So which
02:29 means that on the price risk there is very clear certainty, there is no risk which is
02:33 which such loans are exposed to. When we do the appraisal we are very mindful in terms
02:37 of what they will, how the cash flows will really evolve. So that is not something which
02:42 is a matter of concern.
02:44 I would also say that when it comes to solarization initiative which has been announced by Honorable
02:50 Prime Minister, I would say that it is also given opportunity for scaling up the production
02:59 in this particular sector, be it solar cell, be it solar modules, be it solar panels. So
03:04 all this will also will be a big boost and also there would be people who will be implementing
03:11 the solarization plan. So which will actually give a boost to the SME space also. So I think
03:17 it is going to have a huge impact in terms of the growth for the economy overall.
03:23 Capital adequacy
03:24 You had mentioned when the RBI had announced the increase in credit risk rate that the
03:31 SBI will have a 50 to 60 basis point hit in capital adequacy. However, today in the earnings
03:36 conference we saw that higher credit risk rate have hit CRER by 70 basis points and
03:41 CET1 by 49 basis points. So is there any plan to moderate the exposure so that the capital
03:48 adequacy is not hit further?
03:50 The way we look at it is if at all we can pass on this higher cost of capital to the
03:56 borrowers who are availing such loans, that will be our effort. And we have already initiated
04:03 steps in that direction. And the way I look at it is that if at all there are opportunities
04:08 which are decent, which ensures, which meets our risk appetite, we are there to support
04:14 such initiatives.
04:15 You have already mentioned that your unsecured loan book is safer than the secured loan book.
04:23 On the concerns of strong dependence of NBFCs towards banks for loans, a concern that the
04:32 RBI also highlighted, what happens to NBFCs as an industry, what happens to NBFCs who
04:39 are now will not be able to take loans from banks and what happens to SBI's existing
04:45 borrowers because if they go out to raise funds in the market, they are going to bear
04:51 a higher cost of funds on that front?
04:53 See we have been supporting these NBFCs all this while and also all those NBFCs who are
04:58 meeting our risk criteria. We continue to support them but how much it will depend upon,
05:05 how much according to our assessment we should be lending to them. So I think it is not that
05:12 the bank credit is dried up for them. Bank credit is certainly available but yes of course
05:18 some of these NBFCs will be approaching market for raising bonds etc. So various kind of
05:24 opportunities will be tapped and at the same time these NBFCs will also ensure that their
05:31 loan book growth should be healthy. I think that is what the intent of RBI is when they
05:36 have increased the risk rates and which in turn has increased the cost of funds for these
05:41 NBFCs.
05:42 Last couple of questions. PSU banks have higher portion of MCLR loans in comparison to private
05:51 banks. So there is a conversation that the cost differential does not hit PSU banks as
06:00 much as private banks. So now this is not a permanent solution to the liquidity problem.
06:06 So what is your visibility on the liquidity situation and how long can you say that PSU
06:13 banks will be able to play the deposit rates game?
06:17 We have got a liquidity coverage ratio which is as high as about 130% plus. So we do not
06:23 have any challenge as far as liquidity is concerned and apart from that our credit deposit
06:29 ratio was also 66% as on 31st of December. So I think we are having enough liquidity
06:36 with us and we can ensure that we should meet the credit requirement of the economy as much
06:43 as there is a need for it. So there is no such liquidity challenge with us.
06:48 What about the system liquidity at large?
06:50 System liquidity at large, normally we have seen that RBI ensures that there is adequate
06:55 liquidity and they are coming out with the VRR as and when they are observing that there
07:00 is a liquidity deficit in the system, they are coming out with the VRR. I would say that
07:04 it is a very prudent measure to ensure that the inflation should remain in check.
07:12 Last question, I understand SBI has a decent corporate pipeline but there is also a clear
07:18 potential for other banks also to tap into this market, this segment. Now the conversation
07:24 is that because of the aggressive pricing on corporate loans that PSU banks do, the
07:30 risk cover is not enough for private banks. This pricing does not adequately cover the
07:37 risk that the corporate segment has. So how do you assess that and do you think there
07:42 is a risk building up because of the aggressive pricing by PSU banks in the system?
07:47 I will speak about State Bank of India and I would only say that we are very mindful
07:51 about the risk premium which we should have for any risk which we are undertaking and
07:56 we are not compromising on the risk premium which we are required to maintain for underwriting
08:01 any particular risk. So I think it is not a situation where we are trying to out price
08:07 anybody but yes of course, very important is the cost of resources at what cost people
08:12 are raising the funds, they will have to load the risk premium. So we are in a competitive
08:17 position because considering the fact that we have got a cost of resources which gives
08:21 us an advantage, we are not compromising on the risk premium at all.
08:25 Thank you.
08:30 [music]