SBI chief signals at rise in interest rates

State Bank of India (SBI) Chairman Mr O.P. Bhatt has said in the coming days bank might raise the interest rates.

He said, “There continues to be surplus liquidity in the system and credit offtake has not picked up, in fact it has been negative and by the end of June it could be flat. Capital inflows also look good for now, so there is no pressure on liquidity, however, if RBI takes steps to control inflation, liquidity could dry up, and there could be an upward bias in interest rate.”

The bank plans to raise Rs 15,000-20,000 crore, if possible through rights issue by the end of this fiscal.

He added, “We have adequate capital at present. But we are in talks with the Government for seeking their approval for a rights issue, which would help us maintain the Government's stake at the present level of 59 per cent”.

The bank might also look at the option of raising funds by reducing government stake from 59 per cent.

He said, “Though rights issue will be the preferred route, in case government does not agree for that, then we have the cushion of bringing down government's stake to 55 per cent (59 per cent). There is also a Bill in the Parliament, which will enable us to bring down government's stake further to 51 per cent so we can dilute up to eight per cent and can rise about Rs 20,000 crore.”

The bank is also planning to launch retail bond issue of about Rs 200 crore in the first half of this year. The duration of the bonds will be 15 years, with a call option for 10 years, or duration of 10 years, with a call option of five years, he said.

He informed that bank also want its life insurance venture, SBI Life to get listed. He said, “We are not in need of capital for the company, but we would like it to be listed, so that there can be some price discovery. We are in touch with IRDA for that.”

Regarding its venture in overseas, it is planning into the Latin American countries.

“There are places where we already have licenses. For example, in Botswana we already have licenses and we have not utilized that so far,” he said.

The bank is also thinking of opening branches in countries such as in Africa where there is business from India but the bank has no presence so far, He said the Indian companies might go for doing business in energy, metals or minerals.

The told SBI Cards, the credit card venture of the bank is likely to achieve break even by the end of this fiscal as the losses are reducing, and added, “The losses have been coming down, we have been able to issue about 25,000 fresh cards on a monthly basis; we are hopeful of breaking even by this fiscal.” In the present fiscal the net loss by credit has come down by 17 per cent at Rs 154 crore (Rs 185 crore).