Credit off-take is getting better. It is a slow recovery but it is getting better, says Arundhati Bhattacharya, Chairman, SBI. Edited excerpts from the interview:

HDFC Bank has taken the lead with cutting base rate by 35 bps. Can we expect to see some rate movement from the nation’s largest bank as well?

We are monitoring the situation. IIP data is expected shortly, end of the month is the monetary policy. Would like to wait and watch those before we take a call.

SBI has now been classified as a ‘systemically important bank’. More capital will need to be set aside to cover risks. What would this mean for the bank?

‘Systemically important bank’ was already anticipated. SBI had worked it in even before the RBI made the announcement. In fact, the RBI draft guidelines had indicated additional capital of 0.8 per cent but subsequently only 0.6 per cent additional capital was imposed, that too in a phased manner from April 1, 2016. Capital requirements to adhere to ‘Systemically Important Bank’ norms are well taken care of.

Much has been said about linking base rate to marginal cost of funding. What is your view?

It is almost done the way the RBI would like, maybe with no more than a quarter's lag. We actually do look at marginal cost of funding and base the base rate on that. Probably we have just a quarter lag on it. There’s not too much of a difference if the RBI says that your base rate has to be on marginal cost and not on average cost.

What is your understanding of the GDP data? Most experts we have spoken with have been confused and cautious while interpreting the data. How are you reading it?

We are equally confused and puzzled. The way we understand GDP is, GVA (Gross Value Added) plus indirect taxes, less subsidies. Indirect taxes have gone up 38 per cent and subsidies have gone down 3.5 per cent. In that case how is this not impacting the GVA, and how come the GDP has come in below GVA, we are a little puzzled. However, if you look at the GVA number at 7.1 per cent it’s in line with the SBI’s house-call. We should take comfort from the GVA number, because that seems reliable. Our projection of 7.3 per cent GVA was based on upticks we were seeing in consumer spending especially in areas such as autos and tyre manufacturing. You have seen toll collections going up; have seen heavy commercial vehicle fleet getting replaced; mining activity coming back. Most of the numbers that have come in appear to be in line with our estimates. Manufacturing has also shown a little uptick which is very reassuring. That is the one that really needs to move off the bottom. Overall, the GVA number is reassuring and in line with our expectations.

Between retail loans and corporate borrowing, how does credit off-take look, even as more and more corporates head to the bond market?

Credit off-take is getting better. It is a slow recovery but it is getting better. As you mention rightly there are many more people now going to the bond market for borrowing. I am very heartened that two of our completed infra projects are getting refinanced through the bond route, which means the SBI will lose the asset but I am very enthused, as this is the way infra financing should move. Once the project is completed and cash flow is established, there should be enough appetite in the bond market to take up financing to free up banks to finance new projects.

After your candid conversation with the RBI Governor during the SBI conclave, and as holiday season approaches, any hope for ‘teaser loans’ for the real estate segment?

I continue to say they are not ‘teaser loans’. They were loans given with the full understanding with what a person could bear and accordingly it was just an upfront discount. We have not put in any official proposal to the RBI on discounted loan rates for the real estate.

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