State Bank of India (SBI) cut interest rates on savings accounts recently. Dinesh Kumar Khara, Managing Director of SBI) shared his views on how the move would help the lender.
“This reduction in savings rate will help us reduce cost of funds almost to the extent of 6-7 basis points (bps)," Khara said.
Speaking about the eligibility of non-banking financial companies’ (NBFCs) for availing the moratorium on repayments, he said, “At the IBA level, we are evaluating the aspect. Once we have clarity on the matter we will make an announcement. Apart from other things we will provide any kind of support NBFCs require, be it some kind of loan or anything -- moratorium or no moratorium -- we will look into their needs. We are evaluating various available options as well.”
When asked would NBFCs get the Targeted Long-term Repo Operation (TLTRO) money, he replied, “They are very much there in the reckoning. However, demand seems to be much higher. TLTRO is intended for about Rs 1 lakh crore. Two tranches have already been done. I think all banks are looking at it and we have to keep in mind that many NBFCs which are at the lower end, may not be raising much of the money from the market. So TLTRO is not the only solution for NBFCs. Other solutions involves things like raising short-term loans etc, which would involve some kind of evaluation of the credit risk of NBFCs.”
In terms of net interest margins (NIMs), Khara said, “We hope to maintain our margins. As far as our liquidity position is concerned, it is comfortable for us.”
On non-performing assets (NPAs) impact on Q4, he mentioned, “Some bit of recovery depends on follow-up that has been maintained. We will have to wait and watch as these are early days. All of us are adjusting to the new paradigm and hopefully we will have some visibility in some time to go.”
When asked about what according to him is the biggest challenge for SBI and the banking sector in case the lockdown due to coronavirus is extended in key cities, Khara stated, “We are very closely monitoring the situation and we are only trying to see that we are on the top of the situation.”