PTI
Mumbai
The nation's largest lender State Bank of India is also the largest player in the commercial paper (CP) market, with its exposure in this segment of the money market jumping by a whopping Rs 16,000 crore in the September quarter to Rs 23,000 crore.
Commercial paper is an unsecured debt (generally promissory notes) instrument issued by corporations to meet short-term liabilities.
“Our CP portfolio was only Rs 7,000 crore at the end of the June quarter. This rose to Rs 23,000 crore as of end-September,” the bank's Deputy Managing Director and Chief Financial Officer Anshula Kant told PTI.
Similarly, she said the bank's corporate bond portfolio also grew by Rs 8,000 crore in the September quarter to Rs 35,000 crore.
This makes SBI the single largest player in the CP market among banks, with over 40 per cent share of the Rs 51,000 crore exposure of banks in the segment.
During first seven months of this fiscal, incremental loans of banks grew only by Rs 45,000 crore, while their investments in various non-SLR (statutory liquidity ratio) securities, such as commercial papers (CP), stocks and bonds jumped to about Rs 51,000 crore.
Banks, facing single-digit loan growth for the past many quarters, have been stepping up their non-SLR investments of late.
Kant said all these investments are in companies to which the bank already has loan exposure. They are also highly rated companies.
She further said the bank is doing this as it wants to keep the top-rated and good accounts in their books, as these borrowers are not coming to the bank for capex loans or even working capital funds.
Even after 125 bps cut since January in repo rate by the Reserve Bank of India, banks have not brought down their lending rates considerably.
Cumulatively, they have on an average reduced their base rates by 30 bps since the beginning of the fiscal.
Therefore, corporates are opting to raise funds directly from the market rather than borrowing funds from banks as these money market funds are more than 2 percentage points cheaper than bank loans.
A highly-rated company can mop up funds through CPs at about 7 per cent for working capital loans as against around 9.5 per cent from banks.
Announcing the September quarter numbers, which beat market estimate with an over 25 per cent rise in net profit, SBI Chairperson Arundhati Bhattacharya had on Friday said the bank will be pulling out more money from government securities, or SLR, which stands at 27.4 per cent now, to protect margins (at 3.01 per cent in Q2) in the coming quarters.
Currently, the SLR stands at 21.5 per cent, but all banks keep a higher sum in SLR-securities as their loan book is not growing.
