Saturday October 6, 02:35 AM
SBI chief confirms poor credit offtake
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By Economy Bureau
SBI chairman OP Bhatt on Friday led the chorus from the banking sector about the slowdown in credit offtake due to high interest rates. "There's a bit of concern about a slowdown in credit offtake,'' Bhatt told reporters. Loan growth slowed to 23% in the fortnight ended September 14 from 31% a year earlier, even as RBI increased borrowing costs for banks to a five-year high to stem inflation. He said interest rates are expected to remain stable in the near term. Bhatt's comments bear out the slowdown in automobile purchases that auto majors have complained about. Consumer spending data also shows a sharp dip in spending on durables, including cars and white goods. SBI will also discuss bringing down rates for some loan products or launch festival season schemes at its next asset-liability committee meeting, convened once a week. Bhatt said despite SBI's credit growth being lower than the target of 23-24% until September end, it plans to raise Rs 10,000 crore by selling fresh equity by the year end. He, however, added that the capital would be raised from the market even if credit growth remained lower than targeted. "Once the sanctioned loans are disbursed, it is expected to go up. We are hopeful of achieving up to 25% credit growth this fiscal," he said. "We would like to raise Rs 100 billion (or, Rs10,000 crore)... On current valuation, the government stake will be diluted by 2.5-3.0% after the proposed share sale," Bhatt told reporters after meeting finance minister P Chidambaram. The government now has a 59.73% stake in the bank. SBI needs Rs 4,800 crore to meet Basel-II capital adequacy norms by the end of March 2008, he said. It further needs capital for asset growth and to comply with accounting standard AS-15, which alone would cost about Rs 5,000 crore. Bhatt said capital would be raised within 90 days after obtaining clearance from the finance ministry. The bank was exploring three or four options, including a rights issue, a public offer and preferential share sale, Bhatt said. He said the bank did not plan a stock split, aimed at enlarging the shareholder base, before the proposed issue. SBI stock closed at Rs 1,845.25 on the BSE on Friday, down almost 3%.
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