SBI earmarks 30% for term loans

Mumbai: State Bank of India (SBI) has allocated around 30 per cent of its total loan portfolio towards term loans, which works out to be around Rs 35,000-40,000 crore, SBI chairman Janki Ballabh has said.

Ballabh was responding to questions at the Banking Summit, organsied by the Confederation of Indian Industry, as to who will provide term loans to the industry with the definition of banks and development financial institutions getting increasingly blurred.

Our board has recently decided to earmark 30 per cent for term loans, while the balance 70 per cent will continue to be assigned for the working capital, he said. Currently most banks are granting term loans, subject to each banks risk management policies. Banks need to have all the credit appraisal systems in place before granting such loans and even a seven-to-10-year-term is not a problem.

Ballabh said earlier the bank credit was divided into credit towards large corporates and credit towards the priority sector. Though we are trying to improve the quality of our lending towards the priority sector, we have come to realise that over-dependence on corporates can cause serious problems in our asset-liability management.

Ballabh said every branch of SBI is now being used not only for deposit mobilisation but also as an active delivery point of other products and services. Increasingly, banks will only be able to survive through value-added services, and not through interest margins. We have to improve the quality of our products and the delivery of these products. With margins shrinking, increased volumes have become important.