In an exclusive interview to ET NOW, Arundhati Bhattacharya, Chairman, SBI, said that she is not very worried about the stress in the telecom sector, but urged the government to take proactive steps to support telecos. 

Edited Excerpts: 

Are you a little worried about the conditions of some of your associate banks due to the telecom crisis? Can you expect a rate cut by the SBI? 

It is not very worrying as the reports suggest that the exposure to the Indian banking sector is not that huge. It might impact a few of the weaker companies. We are adequately prepared and I do not really think that is something which will take on major proportions. As the Steel Ministry had taken a few steps to address the distress of that industry, Telecom Ministry should also look at the current situation to determine if there is any genuine stress. If the Telecom Ministry feels that there is a requirement, they should take proactive steps rather than trying to revive something which has gone completely wrong. I had written that letter not in my personal capacity, but as a representative of the banks. 

We understand that the inter-ministerial group is also meeting banks over the next couple of days but in your view who should take a cut? Should the government take a cut in terms of the revenues that it is collecting, whether it is through reduction of license fees or spectrum user charges, is that the most obvious way to give some relief to this sector? 

At this point of time, it is difficult for me to say who should take a cut. Nobody will want to take a cut. But yes the realisation can be spread out over a longer period, because again as I said at this point of time at least even though there is a lot of innovation, I think the next innovation has to be telepathy after telecom. As that does not seem to be on the horizon, I think telecom is here to stay for a while. Therefore, maybe spreading it out over a longer period could be one of things that elevates immediate stress. 

Do you think banks could also use spectrum as collateral, is that an option? 

That is the thing that we have always asked for and I think it should be allowed. At the end of the day we do want to have some security and if you show it as a secured lending, to that extent even our capital requirements come down. We are able to pass on whatever is the savings on the cost to that extent. But if it is not allowed to be used as security, then obviously these things have added cost to the lendings. 

So you do not believe telecom could be the new steel or you think that is an exaggeration? 

No it is much smaller, much-much smaller than steel. And again it is not something that can be imported. So to that extent, it is something that is domestic. 

I want to talk about the NPA issue as you have been in the helm of SBI during challenging times. Many in the market believes that the NPA issue is beyond resolution. Is that your view as well? 

No, I do not really think it is my view. In fact, I think we are getting better by the day, in the sense that more and more provisions are getting created by the banks to counter our weak assets. 

Let us talk about SBI specifically because post the merger with associate banks, your exposure, the consolidated book in terms of its exposure to additional NPA stress has sort of increased a little bit and Q4 numbers reflect that. Your watch list has increased to 32,000 crores and GNPA at about 9 percent. Investors are worried that it could get worst. You said for the economy as a whole it is on the road to recovery, would the same picture hold for SBI? 

I do not think so and when you say investors are worried I do not think they are worried. If they were worried, I would not have such a fantastic response to our QIP. As you know for a 15,000 crore issue we had bids to the extent of 27,000 crores and all of the bids came in at strike. So to that extent, I do not think investors are worried. I think investors are beginning to see what we have done with SBI. In fact, this time in the fourth quarterly result investor conference, we had very few queries on the main bank. Yes there are concerns about the associates we had brought together. Now I would only say this to the industry at large you have the same concerns three year back about us and you have seen where we have brought it. So we will merely do the same thing for the associates. Give us a few quarters and you will see that they will also be firing with all guns. 

The consolidated level, what is SBI’s exposure to the top 30-40 NPA accounts because that is what has been talked about, the government’s intent to fix them, what is SBI’s exposure, how much have you provisioned and how much do you need to provision? 

About my top 50 accounts will comprise about 45 percent of my NPA numbers of the solo, of the consolidated I would not have but of the solo it was around 45 percent. And of that 45 percent I already have coverage to the extent of 45 percent. So again as I said, it is not a very big number. If you look at our consolidated the operating profit as we call it before provisions and tax of the subsidiaries plus us together, it was in the range of 59-60 thousand crores. So for us this amount that may be required further should not woes a problem. 

I know you do not talk about specific NPAs but I will ask you on what has become the poster boy case? 

No I do not think I will answer that . 

Are you hopeful of resolution there as well in the case of Vijay Mallya? 

Let us see. It is something that will take time. But you must understand that we are an organisation. We are not an individual so we have deep pockets and we will keep pursuing. 

Let me shift focus and talk about the central bank. Do you believe that the RBI erred on inflation projection, the latest reading has come in at 2.19 percent as there seems to be difference of view between finance ministry and the RBI as is always but do you think on hindsight the central bank erred on inflation projection? 

It is very difficult to say on what basis they were projecting it. I can only say that internally, within the bank we had projected for lower inflation. We continue to stick with that projection. I can tell you internally only because that is the data that I have access to. So for us, we still believe that inflation is going to be very muted. 

So the government’s view that the there is a plausible alternate macroeconomic assessment and scope for substantive monetary policy easing, do you agree with that that with inflation likely to trend lower, there is scope for substantive monetary assessment which is the view of the government? 

Whether it should be substantive or whether it should be minimal or it should be neutral, again it is in the area of the central bank and I do not want to step in that. However having said that this much I can say that today there is a lot of liquidity, that liquidity is aiding transmission. We have as you know brought down rates appreciably and if the rates come down, to that extent it is helpful towards growth. There has to be a balance between the two because the moment you start bringing down rates, certain inflationary pressures do crop up. But having said that I think India is in need of growth. 

Today one of the biggest things that we have is as I said one of things we believe must happen is better capacity utilisation. For that, you need demand. And for demand to grow, you need growth. So it is a kind of we need to come into a virtuous cycle. The higher interest and higher inflation is a vicious cycle. So maybe we are exiting the vicious cycle and we should come into a virtuous cycle. 

You spoke about liquidity in the market, is there scope for lending rates and deposit rates to go down with status quo as far as the overall…? 

Let us see. We will have check to see how credit growth picks up and we will also have to see… again the amount of money that is flowing out from the amount that was deposited during demonetisation is still continuing. It has not completed its cycle because the last of the curbs went away on the 17th of March. So we are not yet one quarter down. We need to be at least 5-6 months down from that date to determine what will be the resources that will remain with the banking system and then take call again. 

So when is this likely to happen -- the next quarter or…? 

So maybe by another two-three months, end of this quarter we will take a review as to how much of money still remains. By end of March we still had about 60 percent of the money with us but it has been flowing out. So we need to take a call at the end of June and maybe some time in the beginning of the busy season is when the credit demand also picks up so at that point of time if the demand is not picking up that much, then we will need to take a call again. 

Since you were the first woman to be the chairman of SBI, did being a woman make any difference at all and were you sort of surprised that there was not? You did not have a predecessor who was a woman in all these years? 

No. I was not really surprised because what has happened is it takes time for any class of people to reach a particular level. The number of women entering the bank actually started going up during the time when we entered in the late 1970s, it started going up from say mid 1970s. Obviously it takes time for sufficient numbers to build up in order to reach the C-Suite and that has happened now, because of which you will find a number DMDs are also women.

It took time for them to come up, but even then, I still would say that women are still not there in sufficient numbers. We are 50 per cent of the population, so if I take 1,800 people, I would expect 900 or at least 850 to be women, which is not the case. Even today, women are about 30 per cent of the people entering. You have seen the IITs, you have seen the top 100, you have seen how many are girls. So I think there are still stereotypes. It will take time and it will take another three or four generations, by that time we will reach parity. 

You are due to retire in a few months from now. Have you thought of a life beyond SBI? How tough is it going to be for you after having been with the bank for so many years over three decades? 

Yes, it is almost like Linus in Peanuts. He has a security blanket, which Snoopy keeps taking off. So it is like SBI has been like a security blanket. When you take it away, obviously there is going to be a transition. But I am sure I will do something interesting. Frankly, I have a lot of interests and I am not all that wedded only to banking. 

We will see how things go and I am sure there is life beyond the bank. But I will always treasure my years here. This bank is very strange in the sense that not only does it give you a lot of scope, it also gives you a lot of support even where your family and things are concerned. I have never worried if my daughter has fallen sick and I am somewhere else, because there is always somebody to take care of her. 

It will be a colleague’s wife, colleague’s spouse or it will be somebody from among the colleagues. So there is a lot of interdependence that we have nurtured over time. Obviously when you move from that, there is always a feeling of vacuum or loss. But anyway, nature abhors vacuums so I am sure it will get filled in time. 

I want to start off by talking about something that you had raised a red flag on, which is now becoming a concern for the broader economy. It is this issue of farm loan waiver, and now there seems to be this competition among the states to roll out farm loan waivers. How worried are you on the implications that this can have on the boarder economy? 

We need to look at a longer term instead of concentrating on what is happening now. As soon as loan waiver happens, actually my books look better because the money comes back to the banks only. But going forward, the fact is we have to ensure the farmers that they get remunerative price and for that we need much more larger reforms or longer term strategies. 

You do not believe this vicious credit discipline. The reason why I am asking this is in our reports that several farmers who are in a position to repay loans and are still defaulting do you see that trend happening? 

It is very early days to talk about trends. It is very early days. So we do not really know how far things will go. But I think at the end of the day the farmer is also aware that for the next crop he will come back to the bank and therefore to that extent, many of them are very cooperative with us. So again as I said we should not concentrate on something that is happening now rather we should look for solutions in the medium to the long term. 

This issue I want to talk about which is sort of burning is the telecom sector and the stress there. You had written a letter as well and soon after in interview to ET Now the finance minister said that the government or the department of telecom and TRAI cannot preside over the debt of telecom, raising concerns on what is happening in this sector. How alarming is situation, we understand the exposure to the banking system as a whole is about eight lakh crores while to SBI it is sort of minimal but how worried are you? 

No, it is not very worrying because you may have read reports in the press also that the exposure to the Indian banking sector is not that huge plus all of the exposure is not going to go away. It might impact a few of the weaker companies. For that, we are adequately prepared and I do not really think that it is something that is going to take on major proportions. Having said that just as the Steel Ministry had taken a few steps in order to address the genuine distress of that industry, so also the ministry over here should look at the current situation on the ground to determine whether there is any genuine stress and whether any steps need to be taken proactively because it is better to be proactive in taking the steps rather than to try to revive something after things have gone very wrong so that is the reason why we have been proactive. Again the letter that you are mentioning first of all it was written in the capacity as a representative of the banks not in my capacity as a chairman of SBI and it was a representation in order to ensure that people were aware of the challenges that the environment was throwing up. 

We understand that the inter-ministerial group is also meeting banks over the next couple of days but in your view who should take a cut? Should the government take a cut in terms of the revenues that it is collecting, whether it is through reduction of license fees or spectrum user charges, is that the most obvious way to give some relief to this sector? 

At this point of time, it is difficult for me to say who should take a cut. Nobody will want to take a cut. But yes the realisation can be spread out over a longer period because again as I said at this point of time at least even though there is a lot of innovation, I think the next innovation has to be telepathy after telecom. As that does not seem to be on the horizon, I think telecom is here to stay for a while. Therefore, maybe spreading it out over a longer period could be one of things that elevates immediate stress. So we will see the meetings have to take place as yet and I am sure that the group that is meeting is aware of the situation and will try and find some way of addressing the issue. 

Do you think banks could also use spectrum as collateral, is that an option that…? 

That is the thing that we have always asked for and I think it is correct that that should be allowed because at the end of the day we do want to have some security and if you show it as a secured lending, to that extent even our capital requirements come down. We are able to pass on whatever is the savings on the cost to that extent. But if it is not allowed to be used as security, then obviously these things have added cost to the lendings. 

So you do not believe telecom could be the new steel or you think that is an exaggeration? 

No it is much smaller, much-much smaller then steel. And again it is not something that can be imported. So to that extent, it is something that is domestic. 

I want to talk about the NPA issue because you have been in the helm of SBI at a pretty challenging time for the industry as a whole and you have seen this whole NPA crisis up close in personal. Many in the market believes that the NPA issue sort of beyond resolution because what people believe is that we are just sort of kicking the can down the road without 

No I do not really think it is the view. In fact, I think we are getting better by the day in the sense that more and more provisions are getting created by the banks so whatever are the weak assets we are covering them with as much amount of provisions as many we may need to take haircuts. So to that extent, I think we are at the end of the cycle, towards the end of the cycle and in respect of many of the accounts which were earlier suffering from under capacity utilisation, there we are seeing capacities coming up. I can give you for example a few roads. The roads when they did the original traffic studies when they actually got built, the traffic was much lower. Therefore, there was a stress in actually servicing the loans. Again if you remember the loans were given for short periods of time. But with time, the traffic is climbing. If you look at Mumbai airport for instance, I do not know have you ever been in the morning, I am sure you must have been. Even the power I can tell you because in the last three years we have not added any capacity excepting completion of the capacity that was already started. Give it another three years and all of this will be required. We are young country and we are growing by the day. If you stop putting in more capacity, then the utilisation will go up. As the utilisation goes up, the ability to service those loans comes back. So to that extent, I think we are heading towards a better side rather than towards a worst side. At this point of time what is being sort is a comprehensive resolution so that we can say done and over, maybe that is not happening immediately but it will happen and again as I said as the days go I think things are looking better rather than worst. 

AM Naik one of the tall leaders of corporate India in an interview said that he believes only one-third of this so called massive NPA accounts will get resolved, that is his view as industry. Would you share that view or do you think a lot more? 

No it depends. It depends from industry to industry and in any case in all industry there is consolidation. Every industry as it comes to a certain level of maturity, there is consolidation. In that consolidation, some fall but the men will always be there. It is the boys that get sloughed I would say. So that differentiation between men and boys in any industry will happen. 

The one criticism of the ordinance is that the central bank could be taking decisions which are purely commercial decisions which should be taken by commercial banker. How would you counter that? 

Actually we do not know what the central bank is going to do. Till we know what they are going to do for me to opine on something is really a little premature. 

Let us talk about SBI specifically because post the merger with associate banks, your exposure, the consolidated book in terms of its exposure to additional NPA stress has sort of increased a little bit and Q4 numbers reflect that. You watch list has increased to 32,000 crores and GNPA at about 9 percent. Investors are worried that it could get worst. You said for the economy as a whole it is on the road to recovery, would the same picture holds for SBI? 

I do not think so and when you say investors are worried I do not think they are worried. If they were worried, I would not have such a fantastic response to our QIP. As you know for a 15,000 crore issue we had bids to the extent of 27,000 crores and all of the bids came in at strike. So to that extent, I do not think investors are worried. I think investors are beginning to see what we have done with SBI. In fact, this time in the fourth quarterly result investor conference, we had very few queries on the main bank. Yes there are concerns about the associates we had brought together. Now I would only say this to the industry at large you have the same concerns three year back about us and you have seen where we have brought it. So we will merely do the same thing for the associates. Give us a few quarters and you will see that they will also be firing with all guns. 

At the consolidated level, what is SBI’s exposure to the top 30-40 NPA accounts because that is what has been talked about, the government’s intent to fix them, what is SBI’s exposure, how much have you provisioned and how much do you need to provision? 

About my top 50 accounts will comprise about 45 percent of my NPA numbers of the solo, of the consolidated I would not have but of the solo it was around 45 percent. And of that 45 percent I already have coverage to the extent of 45 percent. So again as I said it is not a very big number. If you look at our consolidated the operating profit as we call it before provisions and tax of the subsidiaries plus us together, it was in the range of 59-60 thousand crores. So for us this amount that may be required further should not pose a problem. 

One more question on this broader NPA issue which the finance minister again said that the government intends to crack down on the top five to seven accounts across sort of categories. How soon do you expect that some resolution will come through on these five to seven accounts which are…? 

This is very difficult for me to mention. Until and unless we see what is the framework that RBI is giving and I am sure it will be a very well thought out framework. Until we see that, it would be very difficult to mention because at the end of the day you must understand that these are big companies, the top five to seven companies are all operating assets. They have workers. They have vendors. They have suppliers. There is a whole economy around them. So you cannot do anything suddenly. There might be a lot of other issues. They may be having contracts. They may be having licenses. They may be having approvals which may need to be transferred which may need again to go back to various agencies, so these are things that you cannot talk about very quickly. But having said that once the framework is there and you know how much of what will happen, then very quickly we can say that it is resolved to the extent that yes I know the amount of hit I need to take. I know I can start booking income on these accounts which is a very welcome thing so to that extent in respect of the banks at least we will be able to do it very quickly. 

I know you do not talk about specific NPAs but I will ask you on what has become the poster boy case… 

No I do not think I will answer that. So I do not think you ask it. 

Are you hopeful of resolution there as well in the case of Vijay Mallya? 

Let us see. It is something that will take time. But you must understand that we are an organisation. We are not an individual so we have deep pockets and we will keep pursuing. 

Let me shift focus and talk about the central bank. Do you believe that the RBI erred on inflation projection, the latest reading has come in at 2.19 percent as there seems to be difference of view between finance ministry and the RBI as is always but do you think on hindsight the central bank erred on inflation projection? 

It is very difficult to say on what basis they were projecting it. I can only say that within internally, within the bank we had projected for lower inflation. We continue to stick with that projection. I can tell you internally only because that is the data that I have access to. So for us we still believe that inflation is going to be very muted. Given the fact that we have good rains on the way, I think that is something that is almost given because rains not only predict a good kharif crop, they also predict a good rabi crop. In fact, sometimes rabi is even better because that time the risk of floods and things like that go away. So to that extent if you have two more crop seasons which are going to be good and with the kind of emphasis we have put on keeping food prices under control, I believe that inflation will definitely undershoot rather than overshoot projections. 

So the government’s view that the there is a plausible alternate macroeconomic assessment and scope for substantive monetary policy easing, do you agree with that that with inflation likely to trend lower, there is scope for substantive monetary assessment which is the view of the government? 

Whether it should be substantive or whether it should be minimal or whether it should be neutral, again it is in the area of the central bank and I do not want to step in that. However having said that this much I can say that today there is a lot of liquidity, that liquidity is aiding transmission. We have as you know brought down rates appreciably and if the rates come down, to that extent it is helpful towards growth. There has to be a balance between the two because the moment you start bringing down rates, certain inflationary pressures do crop up. But having said that I think India is in need of growth. Today one of the biggest things that we have is as I said one of things we believe must happen is better capacity utilisation. For that, you need demand. And for demand to grow, you need growth. So it is a kind of we need to come into a virtuous cycle. The higher interest and higher inflation is a vicious cycle. So maybe we are exiting the vicious cycle and we should come into a virtuous cycle. 

You spoke about liquidity in the market, is there scope for lending rates and deposit rates to go down with status quo as far as the overall…? 

Let us see. We will have check to see how credit growth picks up and we will also have to see… again the amount of money that is flowing out from the amount that was deposited during demonetisation is still continuing. It has not completed its cycle because the last of the curbs went away on the 17th of March. So we are not yet one quarter down. We need to be at least 5-6 months down from that date to determine what will be the resources that will remain with the banking system and then take call again. 

So when is this likely to happen, the next quarter or…? 

So maybe by another two-three months, end of this quarter we will take a review as to how much of money still remains. By end of March we still had about 60 percent of the money with us but it has been flowing out. So we need to take a call at the end of June and maybe some time in the beginning of the busy season is when the credit demand also picks up so at that point of time if the demand is not picking up that much, then we will need to take a call. 

You spoke about demonetisation. Have you in a sense changed you assessment of demonetisation given the numbers that we have seen on the Q4 GDP front and SBI document in the public domain also explains the demonetisation has had an effect and sort of it may linger over a period of time as well in terms of slowing down the economy. Are you in agreement with this assessment on the impact of demonetisation? 

There are two things. SBI document that you are talking about is the document that we file for the QIP. Now frankly in a QIP you have to be very conservative and you do not want to mislead investors in any manner. Therefore if there is any risk where there is some percentage of chance it might happen, you need to flag it. So that bit that you are talking about has taken out of context. But on the demonetisation I think from day one we have been saying that the impact will be temporary, that there are two very large good impacts of demonetisation and they continue to. One is of course the one I told you on additional resources and the other is on digitalisation. Digitalisation even though it had reached a very large peak and has come down but it has plateaued. But that plateau is well above the one that we had before demonetisation. Yes there is a new normal that is set. So to that extent, I would say that digitalisation has been advanced by two years in the space of two months. So these are two very positive fall outs. And from the beginning we have been saying this. So there there is no change. 

Since you spoke about QIP little while ago and it was a phenomenal success, you raised 15,000 crores and there was a lot of demand for that issue. But do you believe it was a compelling need for that issue in the first place? 

At any point of time if you have more capital, it gives everybody more comfort. Moody has already said that it is a credit positive. Being the number one bank in the country, we feel we need to be capitalised even more than what the government would probably give. And because we want to be less and less dependent on one source of capitalisation, we felt that if the time is right, if the entire story is looking good, then it is the time to go to market. Also the last raising we did from the market was three years back, immediately after I had come in if you remember in January of 2014 is when we had raised. At that point of time also we had told investors we will come in about two years’ time. So we have gone to the market in about three years’ time. I think we timed it right. We are a big bank. We intend to grow. We intend to capture more market share. We are now a player in the global top 50. So I see no reason why we should not raise money when there is investor interest and when we know that to these investors we will be able to give good returns. 

Few questions on non-core asset sale you recently state that you plan to raise capital via sale of non-core assets as well which are the assets that you plan to look at how soon will a roadmap be ready on that? 

See one thing the road map is already there internally it is like this we are already looking as you know in the insurance business that QIP is more or less on track so we will do that. There are various other smaller non-core assets that we are also looking at so it could be stake sale in may be just now CDSL is coming after that NSE is supposed to come, CCIL is there that is also on the cards that will be up by even UTI. AMC is there so that is also part of it so there are lots of things that we have but these will yield small amounts. We are not looking at very large amounts so let us see how it goes. 

And the Life Insurance IPO that is something as well that you have spoken about? 

That is absolutely something that is on the cards again that story is a fantastic story today I would think that it is the best private life insurance company that is there out there. It is doing very well, its growth is fantastic, its margins are good, its complaints are the lowest in the industry in every which way you know we have also sort of handheld that company to come up to this space. But mind you it is not only this company there are other companies that are doing equally well that will go down the line so whether it be my cards company, whether it be my mutual fund company, cards company came from number four to number two and last month we have now reached the same spot as HDFC for acquiring. So going forward this can only get better same with the mutual fund company again going great guns so there will be other companies that will come up and we are just about going to do a JV for our payment venture, payment services company and very good interest from international names over there as well so there also we are planning on selling some amount of stake. So there will be lots of things that we will be doing and it may not all come in this year but we do have a plan. 

But some of these IPOs you think other than life insurance any other IPO that you could think ? 

No other IPOs this year. 

But Life Insurance will happen this year? 

Sure. 

Few questions on the personal side you sort of broke the glass ceiling by being the first woman to be the Chairman of SBI how would you look back at the journey and would you say that you enjoyed far more independence than you thought you would because you come across as a straight talking banker sort of never fit in the stereotype of the so called PSU banker sort to say would you say that you enjoyed more independence, how much of independence that you I am asking this in the context of what Mr Arvind Subramanian said when he said that bankers do not really speak their mind etc. etc. so how would you look back at your journey in that context? 

I do not know, I have been speaking my mind all this while I think but the fact of the matter is you have to understand nobody directs as to what to speak nobody and I think you know.. 

Not even the government? 

No. If you think that that is the case then you have a wrong idea about PSBs are all about. We have certain processes we need to follow for instance you take the IPO I had to do a proper RFP, I had to get on board merchant bankers for that I had to have a committee that had to assess, that had to document, so all of these will need to get done end of the day whoever gives the lowest bid we will have to go by that otherwise they cannot get on board. These are processes that we have to follow okay if we do not then there could be difficulties but that does not mean that you cannot do things that you really want to do. Yes, there are difficulties in things like say recruitment. Recruitment we still have difficulties because again I have to do a process and the process which takes very long, I cannot go on campus and get readymade people so what do I do. I get very good brains all the same but I get them from tier II, tier III cities people who have not been to management colleges then it falls on me to polish them and make them into shining diamonds instead of the rough diamonds whereas the private sector are getting diamonds that are already polished that is the difference. But the fact of the matter is that yes there are certain difficulties in PSBs just as I am polishing the diamonds it will be very easy for somebody to pluck that diamond and take it away, if I am not able to keep them. So there are certain structural issues which has been flagged to the government I am hoping that they will address them but that does not mean that we are not allowed to speak to the media at large or internally or even to them for that matter the government is very open and we very often interact with them. And I do not think there has…we never any problem on independence actually, they have been really quite hands-on. - ET


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