SBI head sees interest rates hardening soon

There could be some hardening in interest rates in the days to come, according to Mr O.P. Bhatt, Chairman, State Bank of India.
“There continues to be surplus liquidity in the system and credit offtake has not picked up, in fact it has been negative and by the end of June it could be flat. Capital inflows also look good for now, so there is no pressure on liquidity, however, if RBI takes steps to control inflation, liquidity could dry up, and there could be an upward bias in interest rate,” he said.
The bank aims to raise Rs 15,000-20,000 crore, preferably by way of a rights issue by the end of this fiscal.
“We have adequate capital at present. But we are in talks with the Government for seeking their approval for a rights issue, which would help us maintain the Government's stake at the present level of 59 per cent,” he said.
The bank also had the option of raising funds by diluting government's stake from 59 per cent.
“Though rights issue will be the preferred route, in case government does not agree for that, then we have the cushion of bringing down government's stake to 55 per cent (59 per cent). There is also a Bill in the Parliament, which will enable us to bring down government's stake further to 51 per cent so we can dilute up to eight per cent and can raise about Rs 20,000 crore,” he pointed out.
The bank also plans to come out with a retail bond issue of about Rs 200 crore in the first half of this year. The bonds would have a duration of 15 years, with a call option for 10 years, or duration of 10 years, with a call option of five years, he said.
The bank also wanted its life insurance venture, SBI Life, to be listed, he said. “We are not in need of capital for the company, but we would like it to be listed, so that there can be some price discovery. We are in touch with IRDA for that,” he said.
On the overseas front, the bank plans a foray into the Latin American countries.
“There are places where we already have licenses. For example, in Botswana we already have licenses and we have not utilised that so far,” he said.
The bank would also consider foraying into countries where there is business from India but the bank has no presence so far – such as in Africa, where Indian companies might go for energy, metals or minerals, he observed.
SBI Card may break even
SBI Cards, the credit card venture of the bank is likely to break even by the end of this fiscal, he said and added, “The losses have been coming down, we have been able to issue about 25,000 fresh cards on a monthly basis; we are hopeful of breaking even by this fiscal.” The net loss was down by 17 per cent at Rs 154 crore (Rs 185 crore) during the present fiscal.