NEW DELHI: State Bank of India chairman Rajnish Kumar on Saturday said most of the banks in the country will be in a good position with respect to stressed assets by the end of March.
He said the banks cannot go beyond a threshold to bring down interest rates on deposits as India lacks social security schemes; and likewise, cannot lend at lower rates to corporates as the risk of default is too high.
“By March 31, most of the banks will be in a good position with respect to stressed assets,” Kumar said at the 92nd Annual Convention of industry chamber FICCI.
After showing some signs of recovery, as many as 10 banks, including SBI, has disclosed that they had under-reported non-performing assets (NPA) close to Rs 24,000 crore.
“We have repeatedly mentioned that the banking system’s dependence ... in India is largely on depositors. Today, 90 per cent of my deposit is retail deposit. If I want to lend money cheap, obviously I will have to pay less to depositors; and in a country like ours, where there is huge population of senior citizens, and in the absence of social security schemes, the interest on deposits is a source of earning,” Kumar explained.
Reassuring that there is no dearth of liquidity in the system for lending, he added that the problem is that “corporates are not borrowing and not utilising their capacities well.”
On lending to the telecom sector for the next round of spectrum auctions, he said it is “completely unsecured” and in such circumstances, “banks will have to evaluate carefully before lending to the sector as the probability of default is very high.”