The crisis in the non-banking financial companies (NBFCs) is a cause of concern for the entire financial system, said Dinesh Kumar Khara, managing director of State Bank of India.
“The need is to somehow bring in the circulation of money for the NBFC sector and to that extent, we are closely watching,” he said, in an exclusive interview with CNBC-TV18.
Talking about rate cuts, he said, “The loans are subject to renewal every year. So that is a point of time when the interest rates are revisited and also depending upon the conduct and perception about a particular account, the interest rates are decided.”
“In case of SBI, we have linked our interest rates to repo for loans which are more than Rs 1 lakh. So that is done with an intention that it should move in tandem with the repo rate movement. So that is something which has been done. Therefore, to a greater extent in our case, we have tried to align it with the repo rate or maybe it can be aligned to any other benchmark too,” he added.
When asked about banking sector’s expectations from the budget, Khara said, “Capital is also one of the felt need and also this year there would be a requirement for meeting the incremental capital conservation buffer for Basel-III. So that is one piece of it and apart from that, if consolidation can continue, it will probably help in conserving the capital because eventually, we are very mindful of the fact that there is only so much one can expect for the fiscal deficit, but it cannot go beyond. Therefore, there is a need for conserving the capital and for that, consolidation could perhaps be a way.”