SBI hikes interest rates on bulk deposits from today

The largest lender of teh country, State Bank of India has hiked interest rates for from bulk deposits from November 30. The revised rates that are applicable from deposits of Rs 1 crore to Rs 10 crore are one percentage point higher than existing rates across the board (100bps = 1 percentage point).

Deposits up to 45 days will fetch 4.75% as against 3.75% earlier, and deposits up to one year will yield 5% as against 4% earlier. The bank will offer a flat interest rate of 5.25% on all deposits above one year as against 4.25% earlier. Senior citizens are eligible for half a percentage more.

It may be noted that SBI had earlier this month slashed its fixed deposit (FD) rates by 25 basis points across most maturities, effecting from November 1, 2017.

According to the bank, premature penalty for bulk term deposits for all tenors will be 1%. It will be applicable for all new deposits, including renewals. There is no discretion for reduction/waiver of penalty for premature withdrawal of term deposit.

Meanwhile, SBI has also cleared that it believes that the power sector would lead its recoveries from the non-performing asset pile, followed by the steel sector. However, none of the large NPA cases that have been pushed to the National Company Law Tribunal (NCLT) has borne fruit in the form of recoveries.

The bank has a massive exposure of Rs 1,66,893 crore to the power sector, of which Rs 10,472 crore is in the watch list. The iron and steel sector exposure stands at Rs 1,02,215 crore, of this Rs 1,881 crore is in the watch list. About Rs 2,548 crore of its telecom loans are also in the watch list.

The bank’s management led by chairman Rajnish Kumar told analysts earlier this month that they are confident that the worst is behind them, and the bank’s operating income is sufficient to take care of all the normal slippages. The bank reported operational income of Rs 65,000 crore last year, which, it said, will surely see an increase, and help it weather the NPA storm.

“In the power sector, chances of recovering more than 50% are very bright. In some cases, we should be able to recover 100%. The engineering, procurement and construction sector, I have much less hope because it all depends upon the ability to complete the remaining projects and earn money out of it. So if I were to look at sectors, the power sector is no major concern as of now in terms of coming to the sale of assets. The steel sector is looking up. I’m expecting that the losses would be much lower,” Kumar said.

According to the top management of the bank, the bad loans have peaked, and here on, it only expected smaller slippages, mostly out of the watch list.

At the end of the second quarter ended September 2017, the bank’s total advances were Rs 18,92,440 lakh crore, out of which it had total outstanding NPAs of Rs 1.86 lakh crore. Of this, about Rs 72,000 crore of bad loans figure in the two NCLT lists prepared by the Reserve Bank of India (RBI). The first list has Rs 50,000 crore and the second list had Rs 26,000 crore. The bank has undertaken about 52% provisioning for both the NCLT accounts.

Most of the new NPAs are coming from the watch list, which itself has shrunk from Rs 32,000 crore to Rs 21,000 crore at the end of September.

“Our operating income in 2016-17 stood at Rs 65,000 crore. This year, it’s not going to be less than that. So we will control all the normal slippages. We are capable of meeting them,” SBI chairman Rajnish Kumar told at his first analyst meet as chairman after announcing the bank’s results earlier this month.