The country's largest lender State Bank on Wednesday hinted that it may not hike interest rates immediately as liquidity remains sufficient in the system despite the unexpected huge cash outgo on 3G auctions and advance tax payments.
"I think there is enough liquidity in the system...on an average, there is still a fair amount of liquidity in the system," said State Bank of India chairman OP Bhatt on the sidelines of an RBI event in New Delhi on Wednesday.
Nearly Rs 70,000 crore is expected to go out of the banking system next week owing to 3G licence payments by telecom companies to the government by Monday next. This, together with the advance tax outgo in mid-June, is feared to drain out around Rs 1,00,000 crore from the system.
Bhatt, however, said it is too early to say whether the impact on liquidity from the 3G payments will have a temporary or a permanent impact on the overall liquidity condition. The State Bank has been approached by telecom firms for loans of as much as Rs 18,000 crore to make their 3G payments and SBI is likely to disburse nearly half of that amount, Bhatt said.
"We have requests (from telecom companies) for that kind of money (nearly Rs 18,000 crore)...that is at the upper end. We may provide roughly half of that," Bhatt said.
Replying to a question, Bhatt said the bank is unlikely to increase its deposit rates in the immediate future. However, with surplus liquidity gradually disappearing from the system, SBI has re-priced certain segments of its short-term corporate loans by 0.25-0.50 per cent upwards, he said.
Commenting on the bank's NPA levels, Bhatt said the NPAs have started coming down in the last few quarters and "the worst is over."
In the January-March quarter, SBI reported a 32 per cent fall in its net profits at Rs 1,867 crore due to a host of reasons, including higher provisioning for non-performing assets. The fall in profit after tax was due to various reasons like provisioning for increased wages and pensions, higher provisioning for NPAs and a fall in treasury income, the bank said.
The bank's net profit in the same quarter in the previous fiscal stood at Rs 2,742 crore. The bank's provisioning during period in the quarter was 59.23 per cent of the bad assets against 56.98 per cent in the same period last year.