State Bank of India (SBI) is planning to monetise its non-core assets and list some of its subsidiaries in the stock market for raising funds to meet Basel III risk norms, which will come into effect from March 2019.
The banking sector would need capital to the extent of Rs 4.6 lakh crore by 2019 to meet Basel III and IFRS (International Financial Reporting Standards) norms, she said.
“We are looking at options like listing some of our subsidiaries, leveraging various assets and fund infusion from government. Among the subsidiaries we are looking to list are the life insurance subsidiary (SBI Life Insurance Co) and the cards business (SBI Cards),” Bhattacharya added.
Basel III accords deals with global regulatory standard and aspects like bank capital adequacy, stress testing and market liquidity risk.
SBI was expecting a credit and deposit growth by 14 per cent this financial year, said Bhattacharya.
SBI has already announced plans to lower its stake in SBI Life Insurance and SBI General. In its life insurance venture, SBI proposes to sell up to 10 per cent stake while it may be about 23 per cent in case of its general insurance company.
At the same time, Bhattacharya emphasised that meeting Basel III requirements is going to be a challenge.
“It is a challenge because India is basically capital starved. On top of that, you need capital to grow. And to compound all of this, you (have) regulatory requirements on keeping capital at higher level than Basel,” she said.
Risk of shadow banking
The SBI chief cautioned that lack of regulations in the shadow banking sector might have a negative impact on banking. The shadow banking system refers to non-bank financial intermediaries.
In view of the increasing stringent regulations in the banking sector and resultant tightening of underwriting standards, weaker units were left out of the formal banking system. As a result, the shadow banking system was getting prominence, but it was largely unregulated, she said.
“As the entities in the shadow banking sector start leveraging equity, there might be a crisis. It might be difficult to control it,” she said.
Seeks change in recruitment process
Public sector banks should be allowed to recruit from college campuses, said Bhattacharya. At present, recruitments are done through Institute of Banking Personnel Selection.
“Human resource is a challenge for banks. Currently, public sector banks are not allowed to recruit from campuses. We have flagged the issue with the government, and a three-member committee is looking at it,” she said.
According to Bhattacharya, with four new foreign banks, two universal, 11 payments and 10 small finance banks expected to enter the banking sector, competition is expected to intensify. SBI has entered into a partnership with SBI for foraying the payments bank segment.
“Whether payments banks will be viable solely on the basis of transaction is questionable. However, it is the first of its kind initiative. There could be a lot of opportunity in the segment,” she said.