Banking wrap: SBI cuts lending rates, RBI withdraws mandate to disclose IL&FS exposure

Banking wrap: SBI cuts lending rates, RBI withdraws mandate to disclose IL&FS exposure

India’s top lenders, the State Bank of India (SBI) and ICICI Bankposted quarterly results this week with both their managements exuding confidence that the worse is over in terms of asset quality.

Both lenders expect lower slippages in the current financial year. While ICICI Bank did not indicate any revision in interest rates, SBI went ahead with second rate cut in two consecutive months.

SBI cuts MCLR by 5 bps across tenors

SBI has cut its marginal cost-based lending rates (MCLR) by five basis points across tenors, the lender said in a statement on May 10. The bank’s one-year MCLR has been reduced to 8.45 percent from 8.50 percent earlier. SBI had last reduced its MCLR by five basis points across tenors on April 10.

SBI looks to avoid riskier loans for capital conservation

SBI has pegged its credit growth for the current financial year at 10-12 percent, to be mostly driven by retail loans. The bank has decided to go risk-averse on the corporate front to salvage capital.

Chairman Rajnish Kumar said the bank will be “very watchful” of the corporate loan book going forward. Slippages from the retail portfolio that includes agriculture, small and medium enterprises and personal loans, are likely to ease in the coming quarters.

ICICI Bank undergoes change

After going through a rough patch last year, India’s second largest private sector bank is now on the mend and gearing for growth.

On May 6, ICICI Bank reported its January-March earnings, marking six months of performance under the leadership of Sandeep Bakhshi. After the dramatic exit of Chanda Kochhar in October 2018, Bakhshi was left with a mountainous task of rebuilding the image of the bank and reinstalling lost investor confidence. The bank, since then, has come to grips with its situation and is dealing with the tasks at hand.

RBI withdraws mandate asking banks to disclose IL&FS exposure

The Reserve Bank of India (RBI) has withdrawn its circular asking banks and financial institutions to declare details of their exposure and provisions related to the Infrastructure Leasing & Financial Services (IL&FS), following an order from the National Company Law Appellate Tribunal (NCLT).

On April 24, the banking regulator had asked banks and financial institutions to mention the total amount of exposure to IL&FS that had slipped into non-performing assets (NPAs), after NCLAT said the account was not to be treated as an NPA without its prior approval. NCLAT’s May 2 order allows banks to declare the account as NPA.