SBI Asked RBI To Reduce CRR On Green Deposits: Chairman
The bank has also asked the central bank to nudge and help the banking system, Dinesh Kumar Khara said.
The State Bank of India has asked the Reserve Bank of India for a reduction in the cash reserve ratio for green deposits, according to Chariman Dinesh Kumar Khara.
“We have put across to ask (the regulator), one of course, is a reduction in CRR for green deposits, and second, if at all as a policy, it can be incorporated,” he said.
Some efforts have also started from the regulator, and in some years, there might be some impact on pricing, Khara said.
“Early beginnings have happened from the regulator’s side also, but maybe it will take 2-3 years to start having an impact on the pricing too.”
Khara was responding to queries at the inaugural address of IIM Kozhikode and NSE’s annual conference on macroeconomics, banking and finance, in Mumbai.
On green financing, Khara said SBI is engaging with some entities to see if an accounting standard can be set. The way the system is moving towards climate finance, green accounting will be needed going forward, he said.
SBI has started evaluating borrowers on the basis of ESG ratings, the chairman said. “We have also asked the regulator to nudge and help the banking system."
Indian Banking System
Indian banks’ net interest margins could be a challenge going forward, according to Khara.
This could be due to increasing pressure on raising liabilities at the desired price, compared to Covid time, when banks experienced a high CASA ratio, he said.
Some changes will lead to a tectonic shift in the system. Some of them would be induced by technological shifts, according to him.
“As banks update their legacy systems, the shortage of skills may act as a constraint."
Growing regulatory oversight would be a structural shift in the system, according to the chairman.
“Prudential asset liability management and risk management are important... Undertaking periodical stress tests and holding capital buffers is also important,” he said.
Geopolitics is changing growth and information dynamics, Khara said, referring to the Indian and world economies. “Financial market sentiments have been fluctuating, with changing pivots by central banks across economies."
Uncertainty of interest rate reduction is further reflected in U.S. dollar movement and U.S. bond yields, Khara pointed out. However, the domestic situation exhibits a robust outlook and a healthy banking system, he said.
