Bangalore: State Bank of India (SBI) on Monday said it is not lenient with Kingfisher Airlines and treats it at par with Air India and Jet Airways.

"We are not lenient with Kingfisher and are treating it at par with Air India and Jet Airways," SBI Chairman Pratip Chaudhuri told reporters here.

There is no room for further debt and Kingfisher must bring in capital, he said.

He added that it is for the government to decide on changing the FDI rules to allow private airliners to raise capital. "The company has been told that if FDI rules are changed it becomes easier for them (to raise capital)."

Kingfisher needs to get more equity and the sooner they get it the better, he said, adding that loans given to the airline are not much fund-based, but in the form of bank guarantees to oil companies so they could keep supplying fuel to them.

"If we call off the guarantees or discontinue it, the whole fuel chain supply would stop. If we precipitate the action it will endanger jobs and connectivity in the country. So, we are working with the company," he said.

The aviation sector is under stress and companies with good amount of equity can hope to navigate troubled times, he said.

He said depreciation in rupee's value would not have impact on banks. "Depreciation in rupee will not bear an impact on banks."

Chaudhuri said rupee depreciation would impact profitability importing customers, but export customers would enjoy the advantage.

"... we have seen a high increase in remittances from Indians abroad from their NRI accounts," he added.

Further, Chaudhuri said the interest rate scenario would be largely determined by the rate at which government borrowings are made.

Asked about chances of base and lending rates coming down, he said SBI's lending rate at 10 percent is the lowest among public sector banks, though it has not reduced the base rate after rate reduction.

CRR cut would increase banks ability to reduce interest rates, he said, adding that since the Reserve Bank had reduced CRR by 1.25 percent, SBI reduced interest rates on car and education loans and is making deep cuts in lending to SMEs.

"More the RBI cuts CRR, greater will be the ability of banks to reduce rates," he said.

To a query, Chaudhuri said at present Tier-I capital adequacy ratio is at 9.67 percent. Hence, SBI was not stressed for capital and profitability is expected to be good.

He said interest margins available at April end are very robust. SBI has already given guidance that NIM, which was 3.85 percent last year, would be a minimum 3.75 in the first quarter.

On merger of State Bank of Mysore with SBI, he said the economic rationale for merger is as strong as ever, but merger requires capital.

"It will therefore receive some attention as we have just finalised our annual results. We will see how to proceed during the current fiscal year," he said.

Chaudhuri said the bank is under stress, particularly in agriculture and SME areas. "Many of our SMeS are having difficulty realising payment of the supplies made, particularly relating to state government utilities," he said.

He said the rainfall so far has been inadequate in many parts of the country, but last year crop was good. "We have to see how the monsoon progresses this year," he said.

On SBI's assets quality concerns, he said it has seen significant improvement in asset quality. "Net NPA is down from 2.2 to 1.82 percent, which we think is a significant improvement," he reasoned.

(Agencies)

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