SBI chairman reassured margins to remain unaffected by cut in home loan rate

O P Bhatt State Bank of India’s chairman has reassured analysts that the bank decision of cutting home loan rates to 8% will not affect the margins. He also indicated that the bank will raise capital but the process for this will be done only after the elections.

Addressing the chief investment officers (CIO) of top fund houses in Mumbai on Wednesday, Mr Bhatt pointed out that the bank is considering adding nearly 1 lakh new customers to its existing base by offering the special home loans offer. This will also make possible for them to cross-sell other products to these customers, which in turn will result in additional revenues as well as savings by way of lower marketing costs.

Explaining about the 8% offer, Mr Bhatt notified the decision is also motivated by the fact that the bank invests a significant amount of surplus cash in the repo market where returns are only 4%. Therefore by redirecting this money as loans to home buyers, the SBI will be able to make twice that rate of interest. Mr Bhatt notify the CIOs that even if a part of surplus cash — one which they receive 4% — is forward as loans to home buyers; it will in turn boost margins.

However by the quarter ended December 3008 SBI net interest margin (NIM) improved to 3.15% from 3.01% in the corresponding period last year. Mr Bhatt notified analysts that he is expecting real estate sector to stimulate with SBI’s 8% scheme. As per the report of Antique Stock Broking, Mr Bhatt acknowledged that there are ownership issues with respect to maintaining the government share while raising capital. The report also stated, “Besides, political will of the new government would also be considered”.

As per the report Mr Bhatt, is expecting NPAs to rise gradually. NPAs might even double in case the economy continues to remain under stress, but he warned that it will not touch the 90 level like the earlier. The report also citied Mr Bhatt as saying that NPAs will rise in the short term due to provisioning norms, but will return to standard assets when the economy starts improving. He even anticipates negligence in export-oriented sectors like textile, gems and jewellery, auto components and IT sector.

The SBI chairman revealed that high-cost deposits comprise about 25-30% of the total assets and are for shorter duration. As these bulk deposits get revalued, the cost for the SBI will come down. However he stated that in the short run, the bank might feel some pressure on its NIM as it raised term deposits for three years whereas the impact of the cut in lending rate will be visible on the entire portfolio.

SBI announce freeze on rates on new home loans for 1 year

On Saturday State Bank of India (SBI) country’s largest public sector bank has announced freeze on interest rates on new home loans at eight per cent for one year.

But for its existing customers, a new scheme SBI Lifestyle Loan has been initiated under which customers will be able to avail eight per cent interest rate for one year.

As per SBI release this facility will be available to the amount of 10 per cent of their home loans but up to a maximum of Rs. 5 lakh.

The release also added the new scheme of eight per cent interest rate will be applicable for loans taken during February 2 and April 30.

The release stated the bank would be resetting the interest rate after the freeze period to the same rate as originally applicable under the respective schemes.

The existing borrowers of the bank under the two home loan schemes — loans up to Rs. 5 lakh and Rs. 5-20-lakh range — will also be offered at eight per cent for one year.

The release said at this point after the freeze period the originally constricted rate will be applicable.

In the release bank’s newly launched packages for SME borrowers —SME Care — were also mentioned under which an additional working capital facility of 20 per cent of the fund based limits to customers will be offered.

The release stated, “The loan will be given to take care of inventories of raw materials, finished goods as also delayed payments from their buyers in the current downturn at an interest rate of 8 per cent”. The repayment tenor of the loan will be one year.

The bank added in addition to this bank has also introduced SME Help, under this term loans will be given to purchase fixed assets including generator sets with concessionary interest rate of eight per cent for the first year.

The release stated after the first year, the applicable rate will be charged for the loans.

SBI awarded 2 IBA Award

State Bank of India has bagged two prestigious awards from Indian Banks Association namely "RURAL BANKING INITIATIVE "AND "BEST IT ARCHITECTURE". The award was given on 20th January 2009 in the IBA & TFCI's 5th Annual Banking Technology Awards function, 2009 held at Mumbai.

SBI is having a network of 4261 rural branches in Rural Banking Initiative, which is a astounding 38% of its network. All these branches including diverse geographical terrains- some in the hilly and mountain raven regions like Leh at an altitude of 13000 feet above the sea level are on Wide Area Networking Platform. One of the Bank's aims is to offer service even in the remotest part of the country. In alliance with this acknowledged objective, the Bank is setting up another 1000 new branches in rural and semi-urban areas before March 2009.

In IT Architecture, State Bank of India (SBI) which is largest premier financial institution in India having a network of 11,500 branches and an additional 4600 branches of its associate banks spread across India has upgraded its IT Architecture by getting on an ambitious Core Banking System (CBS) implementation with an aim of connecting all the branches that will serve to 150 million plus accounts with a daily transaction volume of 25 million plus transaction per day. The environmental friendly feature of SBI's CBS architecture has allowed flawless edge with other IT initiatives like ATM, Internet Banking (both retail and corporate), Payment Systems (NEFT, RTGS, SWIFT, ECS, and EDI), Government Business, Financial inclusion, Treasury and Foreign Exchange.