State Bank of India’s lending margins may get compressed by 3-5 basis points due to deposit repricing during the course of the next two quarters while the loan book is expected to grow between 12% and 14% this fiscal.

“Our margins may see an impact of another 3-5 basis points due to the increase in deposit rates only. As far as the loan book is concerned, we have already offered whatever concession we had to,” said SBI chairman Dinesh Khara.

Unsecured loans not a concern

The country’s largest lender is not worried about its unsecured loan portfolio, a segment of lending the Reserve Bank of India (RBI) has asked banks to be cautious about so that no undue risk gets built up in the system.

While there are concerns on the growth of unsecured loan portfolio in the banking industry, Khara said it is not a matter of concern for SBI at all. “Our unsecured book is better than secured loans.” Khara said. 

In fact, Xpress Credit has been one of SBI’s safest product lines as it is given to corporate salary account customers. “Out of the total portfolio of Xpress Credit, nearly 82.6% of the customers are either employed in armed forces or are government employees and nearly 12% are employed with reputed corporates including public sector entities,” Khara added.

The State Bank of India’s portfolio of Xpress Credit stands at Rs 3.2 trillion as on September 2023, with a gross non-performing asset (NPA) ratio of 0.69%. It constitutes 25% of the bank’s total retail personal portfolio of Rs 12.43 trillion. 

“We also have a strong analytics-driven collection mechanism using Contact Centre for the pre-delinquency Outbound Voice Recording calls and also Loan Account Management system for calling by the branches. This is why the gross NPA of the portfolio is only at 0.69%, indicating resilience of the portfolio in terms of asset quality,” Khara told analysts.

Analysts have pointed out risks of increase in delinquencies in the unsecured retail loans, especially in below Rs 50,000 category of loans. SBI, however, doesn’t have any unsecured loans below Rs 50,000, Khara clarified.

CASA focus, with emphasis on current account

Even as loans are outpacing deposit growth, SBI is looking at mobilising more current accounts (CA) even as it grew over 8% year-on-year during the quarter ended September.

“We are trying to build up our current account savings account (CASA) focus, with more emphasis on CA. So far as CA goes, we have a huge dependence on the government deposits. But we started derisking ourselves and we got into trade & commerce industry,” said Khara.

SBI’s CASA deposits declined to 41.88% of domestic deposits (amounting to Rs 45,03,340 crore) as of September 2023, from 44.63% (aggregating Rs 40,28,012 crore) a year ago.

As of September 2023, SBI’s CA and SA deposits grew by 8.77% and 4.34%, respectively. While CA accounted for 5.62% of domestic deposits, SA accounted for 36.26%.

“There are many other players who increased rates. They witnessed a drop in CASA by 600-700 basis points. During inflationary condition, the tendency of people is to look for products which give inflation-adjusted returns," Khara said.

Six months back, SBI started transaction banking hubs across India that led to growth in current accounts.

SBI has opened over 40 lakh savings bank accounts and almost 1.40 corporate salary package accounts during the September quarter.

Loans 

Buoyed by a healthy credit pipeline of Rs 4.8 trillion, SBI expects to grow its loan book by 12-14% in the current financial year.

“We have about Rs 3.4 trillion of loan proposals in pipeline and Rs 1.4 trillion pending for disbursements. We expect them to get disbursed in the next 2-3 quarters,” said Khara.