Cash-rich SBI goes for big push in retail loans

The State Bank of India (SBI) is planning an aggressive push of its retail business. It has taken the lead to bring down interest rates for retail loans — home loan rates are down to 8 per cent and auto loans to 10 per cent.
“The large cash reserves of the bank and dip in the cost of funds leave the bank with room to induce more interest rate cuts or customer-friendly measures in the coming months,” a senior SBI official told Financial Chronicle.
As on December 31, 2008, SBI retail book has grown by Rs 4,562 crore to Rs 104,261 crore over the previous quarter.
SBI mobilised well over Rs 40,000 crore in term deposits in November 2008 with attractive interest rates of 10.5 per cent and 11 per cent for senior citizens through its special deposit mobilisation scheme.
As a result, although total interest expenses grew by 45 per cent to Rs 12,272 crore by end of third quarter (December 31) from just Rs 8,410 crore in the corresponding period last year, the bank has managed to keep the expense ratio under check because of the fall in bulk deposit rates to less than 7 per cent. The expense ratio fell by 439 basis points to 47.35 per cent, as on December 31, 2008.
In addition, in an official note, SBI states, “There will be a major push on retail assets especially home loans for a portfolio growth of 22 per cent by the end of the financial year 2008-09. For this, the bank will have a sales force strength of 1,900.”
Additionally, there will be 1,200 financial advisers in place for wealth management, cross-selling of mutual funds and insurance business.
SBI has already cornered 18 per cent of the home loan market, making it the third largest lender after HDFC and ICICI Bank. SBI’s home loan portfolio has grown by Rs 1,478 crore to Rs 52,062 crore during the third quarter.