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SBI is at present looking into all the aspects of the base rate system proposed by the Reserve Bank of India and is yet to take a final call based on the asset-liability situation, its chairman has said
The country's largest lender State Bank of India (SBI) on Monday said that the proposed base rate for the bank seems to be around 8%.
"Base rate at this point seems to be around 8% for the bank," SBI chairman OP Bhatt told PTI on the sidelines of an AIMA event in New Delhi.
The Reserve Bank of India (RBI) has proposed to replace the benchmark Prime Lending Rate (PLR) with base rates from April this year.
The base rate is the lowest rate that a bank can charge from a customer and is intended to bring about more transparency in the lending operations of banks.
SBI is at present looking into all the aspects of the base rate system proposed by the RBI and is yet to take a final call based on the asset-liability situation, Mr Bhatt said.
Asked if SBI has approached the RBI for more time to migrate to the base rate regime, he said, "We do not intend to approach the RBI but possibly other banks may seek some relaxation for compliance."
Further, he said base rate would not translate into higher interest rates.
Asked about the merger of the State Bank of Indore with itself, Mr Bhatt said that the merger should take place by March this year.
The bank is currently seeking regulatory approval from the RBI and thereafter it will go to the government for clearance, he said.
This will be the second such merger of its associate banks. In August 2008, the bank had merged the State Bank of Saurashtra with itself.
Post-merger, SBI will be left with five associate banks—State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad.
Among its associates, State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore are listed on the bourses.
Last year, the central board of SBI gave its approval for the merger of the State Bank of Indore with itself. Following this, the government of India also gave its in-principle approval to the merger.
SBI holds 98% stake in the State Bank of Indore that posted a net profit of Rs279 crore in 2008-09.
Asked if SBI would consolidate other associate banks, Mr Bhatt said, "We are trying to do that, (the) direction has to come from the government."
A proposal to enhance the investment limit to 60% of the net-worth of public sector banks and financial institutions or up to 10% of capital employed will be taken up at the EPFO's advisory body meeting on 26th February
Retirement fund managing entity Employees' Provident Fund Organisation (EPFO) is likely to hike the cap on investment in bonds of highest-rated public sector undertakings (PSUs), banks and financial institutions on the lines of the insurance sector to earn better returns, reports PTI.
A proposal to enhance the investment limit to 60% of the net-worth of public sector banks and financial institutions or up to 10% of capital employed will be taken up at the EPFO's advisory body Finance and Investment Committee (FIC) meeting on 26th February, sources said.
At present, EPFO can only invest up to 40% of the net-worth of PSUs or state-run financial institutions and up to 45% of that of public-sector banks.
The proposal will provide more investment opportunities to the EPFO, which is flush with funds with incremental deposits of about Rs25,000 crore every year, but its capability to subscribe to high-rated bonds is limited by the current curbs on investments.
"EPFO is at present facing an unusual situation of increasing funds but decreasing issuers to subscribe to. This may have serious repercussions on our ability to earn the best possible rates on our investments," says the proposal.
The total corpus of EPFO currently stands at around Rs2.57 lakh crore. It has a subscriber base of over 4.71 crore.
The proposal is required as the EPFO has either exhausted or is on the verge of exhausting the current investment limits in major players in the bond markets like IDBI Bank, Power Finance Corporation and Rural Electrification Corporation.
After the FIC firms up its views, the recommendations would be placed before the EPFO's apex body—the Central Board of Trustees (CBT).
Generally, FIC recommendations find favour with the Trustees, headed by labour minister M Mallikarjun Kharge.
According to the proposal for the forthcoming meeting of FIC, the enhanced limit should be restricted to issuers with the highest credit rating of ‘AAA’. The proposal is on the lines of the cap mandated by insurance regulator IRDA.
The proposal said for the remaining institutions, the current limit of 40%-45% of net-worth should be retained. For the bonds issued by private sector companies, the proposal calls for retaining the current limit of 25% of net-worth for non-banking companies and up to 30% for banks.