What is your understanding of the economy and the business impact of the second Covid wave? The first wave was brutal on banks and the economy. How big has been the collateral damage so far?
It is kind of a repeat of what we had last year except for the fact that the spike in the infection curve has been parabolic. That was not expected. Last year, the lockdown came in the last week of March. This time it has come in the third week of April in different locations. We saw an increase in deposits initially and then in the second half the credit pick up happened, housing loans took off, governments gave discounts and reduced the stamp duty. Interest rates are already at a record low, demand was there and people have saved a lot and spent a lot also.
Till the first week of April, we have seen the instalments coming in. So, to that extent, we have not seen any deterioration in the numbers. Last year, we also gave options to customers, especially on the retail side, to postpone their instalments. But all the instalments came and we did not see any stress in particular over there.
Going forward, I would only hope and pray that the same thing repeats in this financial year also. So far, it is holding up. We hope that this does not last more than a quarter and the flattening of the curve starts happening soon. The fact that the government announced vaccination for all above 18 from May 1 is welcome. Money has gone into Bharat and it has gone into Serum Institute. So, some kind of supplier credit has happened. From our side, we can only be hopeful. It is too early to take any call very frankly.
The problem is at the bottom of the pyramid, the lower strata and the MFI space where job losses have happened and migrant labour issues are going to be challenging. Will the second wave impact this end of the society and would the borrowing cycle be even harder because the numbers are so big that the impact is going to be felt very hard?
Quite possible but again, it is very difficult to give a definite direction. If more lockdowns are announced, there could be loss of life and livelihood just like last time. This may be repeated this year also but it is too early to take a call on the numbers or on the delinquencies. The initial estimates are that the lockdown is not as severe as it was last year where there was no traffic on the roads, no toll collection, the aircraft were not running, the trains were not permitted to run and so on. This time, it has been more measured, more calibrated. So the collapse of demand may not be as strong this time around.
Digital may continue to see an uptick, deliveries are happening and to that extent, the services sector that was really impacted may not be that bad. Very frankly, it is just a wait and watch kind of a situation and I do hope that within the next one month, things improve.
Last time, RBI came out with a moratorium to help the borrowers. The government came out with credit guarantee schemes which gave a lot of help to the entire SME and MSME sector. Do you think a similar scheme should be considered again?
I think the jugalbandi that you saw last year will continue into this year also. So let us just go back to what the governor said in his last policy statement. He actually used the word whatever it takes and there are plenty of measures that RBI can always take and the fact that he has announced things like the government securities acquisition programme, the fact that he said OMOs would be in addition to this. He will be accommodative to all those things. RBI will be in readiness to provide all support to the financial sector, to the industry and to the economy.
There was some optimism in the last couple of months. Could the second wave challenge that optimism?
Three months in the life of an economy does not really make a difference. At the most, it can be postponed by three months to six months. The commodities cycle still looks pretty strong, pretty robust. A blip or a pause of three months should not affect the long-term story of our economy.
Birla AMC has already filed for an IPO. There is HDFC Life. There is Nippon. There is Birla. When will SBI AMC see the light of the day?
I would think that within a year we should be done with the process. So SBI Mutual Fund will definitely be the next subsidiary of the State Bank Group that will be listed. So maybe around the first quarter of the next financial year.
The digital business which is the YONO business, has reached a critical mass both in terms of size and the fact that it is now nearing its break even while a lot of other fintech firms in the payment business are still losing money. When are you planning to monetise it?
The question of monetising may be some time away or we are not even thinking about it. It still needs to gain critical mass. We think that it will grow very fast this year also. We have been having a CAGR growth of about 35% there. We are in excess of 5 lakh crores plus the PMS that we do is another Rs 7 or 8 lakh crore or so. The total business that is managed is about Rs 13 lakh crore. It has scaled up very well. The profitability numbers are also likely to be decent for the previous financial year and the digital bit. So many changes are happening every other month. A lot of scope exists over there.
State Bank of India is the only large bank which did not raise capital even at the peak of the pandemic news. Do you have sufficient capital buffer to participate in the growth cycle?
We are very comfortable at the moment. You will see our numbers within the next one month. We think that our capital requirements are met by our own internal reserve and profits that we have. As time goes, we will have a look at equity raising but in the next six to seven months, I do not think we’ll be coming to the market. We are quite well and adequately capitalised at the moment.
Citi India has gone on record saying that they want to monetise their consumer businesses, credit business and wealth management businesses. Is there any business there which excites you?
Certainly. So maybe not the whole piece, but if it is available in segments, we may look at some part of it.
Can you be slightly more specific about which end of the business excites you?
There are plenty of things. Number one is their retail franchise itself. The kind of clientele they have is interesting as is credit cards business and even their housing portfolio. We will examine it once the opportunity is shown to us.
ET Now: A lot of other banks are facing breakdown issues including some of the best private sector banks but SBI has done a great deal of technology advancement. How did you adopt that?
Ashwani Bhatia: When SBI Mutual Fund became number one in the market, somebody asked me how could you beat the private sector players and I said why not? Where do we lack in human resources, capability and reach? I would give the same answer here also.
SBI has reinvented itself again and again. We have shown direction everywhere. In the ‘60s and ‘70s, it would have been the small scale industry (SSI) or agriculture, MSME sector wherever. I would think that we would continue to be thought leaders and provide support in whatever form and we will use the best in-house talent to improve our capabilities, our products and our technology.
