SBI confident of outperforming other banks

Jagdeep Worah
16 April 2009

The government-controlled State Bank of India, the country's biggest lender, expects to increase its loan portfolio in fiscal 2009-10 as its vast and expanding branch network will help it outperform other banks, chairman O P Bhatt told the media in Mumbai.

SBI and its associates control nearly a quarter of Indian bank loans and deposits. Bhatt said the bank plans to open 1000 more branches in the year to March 2010 to add to its 11,000 branches. "We are projecting a growth of 25 per cent during this year," he said, adding that many new branches would be opened in rural areas.

On Monday, SBI extended its concessional home loan and car loan rates up to 30 September. According to Bhatt, it has lent Rs1,350 crore over the first 40 days of the scheme.

Bhatt also said SBI may seek to raise up to Rs400 crore from the market in the next financial year, if the government permits it. He admitted that bank margins are under pressure, as state-run banks have cutting rates under government instructions.

He said that funds mopped up at higher rates between October and December last year, along with lower credit demand, were putting pressure on SBI's net interest margins. ''In the fourth quarter, NIM (net interest margin) would have dropped to around 3 per cent, from 3.16-3.17 per cent earlier. But we are hoping to keep it at around 3 per cent during the current financial year. Any small variation in margins has a large impact on the balance sheet.''

During the third quarter of 2008-09, SBI had launched 1000-day deposits at over 10 per cent, which helped it to raise around Rs1000 crore a day. While the pace has dropped to around Rs500 crore a day, the bank would have to pay higher interest rates for three years, even as lending rates on most of its portfolio subsequently dropped to single-digit levels.