SBI on Tuesday said it is planning to monetise non-core assets and list some of its subsidiaries for meeting capital needs as well as global risk norms, Basel III, which will kick in from March 2019.
Public sector banks need Rs 1.80 lakh crore to meet Basel III norms, while the government will provide only Rs 70,000 crore, SBI chairperson Arundhati Bhattacharya said, adding that the rest will have to be borne by banks through profits and non-core assets.
"For instance, for us, we have a number of non-core assets which we are looking at monetising. We also have very successful subsidiaries which we have not listed. So, we can look at those as well," she said at an Assocham event here.
The bank has already announced plans to lower its stake in insurance ventures—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.
Bhattacharya said that individual banks are examining various ways through which they can raise the capital.
"One thing I would like you to be assured about is that there is a lot of thought going (into it) and the banks will be capitalised enough in order to have good capital to support the economy," she added.
She emphasised that meeting Basel III requirement 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.
This is a challenge that all banks have to face and they are in a position to base the kind of capital that the regulator would like them to have, she added.
Stating that India does not require such stringent capital norms, she said: "Basel template as it was created was really and truly not meant for a country like India which has plain vanilla banking. West, they have the investment led model. They have got many, many complicated products."
Basel norms basically provide risk templates for banks and amount of capital it is required to keep against lending.
On interest rate, Bhattacharya said, since banks play a part in providing social security, they cannot provide negative rate of return to savers.
In a developing economy, inflation is slightly high so that banks have to provide slightly higher returns over inflation so that savers earn some positive return, she said.
If the cost of borrowing for banks comes down, the lending rate can be lowered, she added.
Ruling out that net interest margins of Indian banks are high, Bhattacharya said this is not a fact and the spread in India is quite reasonable.
"Spreads are not higher in India. It is similar or lower than other countries," she added.
With regard to financial inclusion, she said, the banking sector has embarked on the second phase of Pradhan Mantri Jan Dhan Yojana as 98 per cent households have bank accounts.
Besides opening 70,000 accounts every day, the bank is now looking at providing other facilities like loans and overdraft facility.
Terming Aadhaar as huge achievement for the country, she said, it is the world's largest database.
"Aadhaar is not available in any other country of the world and it is something that can change financial inclusion totally because it is something that will enable us to ensure that subsidy goes to one person, goes directly into his hands, there is no middle person, there are no leakages in the system and therefore the efficiency of the usage of that subsidy is fully ensured," she said.
Bhattacharya further said that the bank is in the process of setting up electronic platform for bill discounting.
It has roped in National Stock Exchange and SIDBI for this.
The Reserve Bank in 2014 issued norms to set up of an exchange-based trading platform, Trade Receivables Discounting System (TReDS), to facilitate financing of bills raised by micro, small and medium enterprises (MSMEs) to corporate and other buyers, including government departments and PSUs by way of discounting.
On Yuan devaluation by China, she said: "The competitive strength of our exported items comes down... Chinese goods become cheaper so it is difficult for our exporters."