SBI chairman expects margin to improve after the RBI rate hike
State Bank of India (SBI) Chairman Dinesh Kumar Khara believes that riskier assets will attract higher lending rates, but if the quality of the loan is good, the rates will be lower and the risk premium will be adjusted accordingly.
State Bank of India (SBI) Chairman Dinesh Kumar Khara expects margins to improve, following the Reserve Bank of India's (RBI) 6th rate hike on Wednesday of 25 basis points to 6.5 percent.
“With this policy rate increase, I expect margins should improve,” said Khara, who also believes that riskier assets will attract higher lending rates, but if the quality of the loan is good, the rates will be lower and the risk premium will be adjusted accordingly.
When asked about the Adani Group, Khara stated that he was unsure whether they would approach SBI for loans and confirmed that they have not seen any default by the group in the past. “I don’t know whether the group will approach us or not. More important, whatever lending has been done by banks like us — this is a very small component of our total loan book, and this is all supported by physical assets and we have never seen any default in the past,” he said.
Last week, Khara had told CNBC-TV18 that the bank’s lending to Adani group companies were only for projects that are tangible assets and have good cash flow and so it was not worried about stock market volatility.
Khara on Wednesday also said that foreign banks have not taken any guarantee from SBI for Adani loans. “Whatever you have in mind in terms of foreign bank having taken some guarantee from us, none, nothing like that,” he clarified.
Discussing non-fund based limits, he said they are only for the purpose of their economic activities. He welcomed the policy action in terms of penal interest and said that it will benefit both the system and borrowers.
The central bank on Wednesday also said it would issue draft guidelines for transparency in the penal charges or interest charged on loans. As of now, these charges vary within banks and NBFCs. Currently, there are no guidelines on how much penal interest can be charged by them. However, once the draft guidelines are out, the RBI will invite comments from various stakeholders such as borrowers, banks and other institutions and after the discussion process, will issue final guidelines.
Khara said the guidelines would take away the arbitrariness on penal charges on loans by banks.
The RBI also proposed to expand its scope of Trade Receivable Discounting System (TReDs), which Khara said is a big enabler and also invited suggestions for the same to allow secondary market operations.
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