State Bank of India (SBI) has Rs 2.5 trillion worth of corporate loans lined up, Chairman Dinesh Kumar Khara said on Wednesday, adding that the banking system was currently much better placed in terms of risk assessment.


“Today, it’s not merely the equity but the colour of the equity which has improved,” Khara said, referring to learnings incorporated by the banking system from the previous cycle of strong loan growth and a subsequent build-up of bad assets for . He was speaking at the Banking and Economic Conclave.


“I would say that from the infrastructure point of view, the banking system is much better placed. They can assess the risks much better and are better equipped in terms of capital. So, I think all put together gives the impression that today the banking system is much better placed and probably the kind of growth which we are seeing is sustainable,” he said.


Khara said up to 95 per cent of SBI’s corporate balance sheet was provided for. “The growth is coming at a time when corporates are deleveraged. That also gives us the confidence that the path which we are treading is sustainable,” he said.


“The ecosystem in terms of strengthening the ratings system, GSTN has given us credible data to evaluate the risk better. The banking sector has the benefitted of leveraging all these ecosystems,” he said.


In response to a query regarding the wide gap between bank credit growth and deposit growth — and the subsequent need to mobilise funds — Khara said liquidity in the banking system had improved in November on account of government spending.


The latest RBI data showed that as on November 4, credit growth was at 17 per cent year-on-year, while deposit growth was at 8.2 per cent.


The chairman also said could opt to bring down holdings of excess Statutory Liquidity Ratio (SLR) in order to access liquidity. SLR is the portion of bank deposits that must mandatorily be parked in liquid assets and primarily comprised holdings of government bonds.


At present, the SLR requirement is 18 per cent of net demand and time liabilities — a proxy for deposits. However, are currently holding SLR much in excess of the required portion. The RBI had said in August that the excess SLR was close to 9 per cent.


Khara said on Wednesday that SBI’s excess SLR holdings were to the tune of Rs 3.85 trillion. He, however, said was not at the moment looking to bring down that figure.


“There is no need as such. If there is a need (of unwinding), banks have to decide whether it is better in investment or in loans,” he said.


Elucidating on the challenges being faced by banks because of the currently wide gap between deposit growth and credit growth, Khara spoke about how some lenders would have raised resources at a high cost.


“What is a high CD (credit-deposit) ratio level? Normally, it should be at 75 per cent. We are at 65 per cent,” Khara said.


“If CD (credit-deposit) ratio goes high, then there could be a challenge for banks. They would have to raise resources at high cost. That is what is happening. Some of the banks are willing to the extent of 7.5 per cent for deposits also. This will curtail their ability to lend at competitive rates,” he said.



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