Tomorrow is the Reserve Bank of India (RBI) Monetary Policy and expectations of a rate cut are high. Rajnish Kumar, Chairman of the biggest public sector bank of the country SBI said a 50 basis-point cut would be a very ambitious expectation.

Talking about higher NPAs in MUDRA loans, Kumar said usually the size of these loans in the portfolio of most banks is not very high. "For SBI the entire outstanding portfolio for MUDRA loan is around 1 percent. Within that there are higher NPAS," he added.

With regards to credit growth, he said right now it is all driven by the retail and corporate because a lot of sanctioned working capital limits are there where the utilisation is around 30-32 percent. So hopefully, the demand will come for funds and once the demand comes then we will have better credit growth numbers, he said in an interview with CNBC-TV18.

On capital raising plans, the chairman of the largest lender said, "I do not see any need that in near future we will be approaching the capital markets to raise capital."

Below is the transcript of his interview

Q: What are you expecting tomorrow? One of our own shadow MPC members is expecting a 50 basis cut, you think that would come?

A: It is very difficult to read into the minds of the MPC but 50 basis points (bps) rate cut, to me, seems to be very ambitious expectation.

Q: This time it will get passed on, are you seeing a greater traction as home loans become 7 point something and car loans become 9 point something, are you seeing retail demand coming up?

A: That will help, as the interest rates go down and the equated monthly instalment (EMI) goes down, it may give further push as far as the retail loans are concerned.

Q: What have you seen up until now, has there been any pick up as far as credit demand is concerned over the last month, month and half and if yes, where are you seeing higher demand come through, is it retail or is it corporate?

A: Retail we are fairly alright, there has been a big push around retail and MSME loans. Corporate loans, I have mentioned earlier also that the utilisation of the working capital limits it is yet to pick up and there are many sanctioned term loans where disbursements are yet to happen.

Hopefully, as we move into the busy season there will be demand for funds from the corporate sector.

Q: In a reply to parliament the government appears to have said that Micro Units Development and Refinance (MUDRA) loans are showing higher non-performing assets (NPAs) what has been the experience at your end?

A: There are higher NPAs in the MUDRA loans, but the size of these loans and the portfolios with each bank is not very high in percentage terms. For example for SBI, the entire outstanding portfolio for MUDRA loan is around 1 percent. Within that there are higher NPAS.

What I am saying is that MUDRA loans even if in percentage terms, the NPAs are higher, the impact on profit and loss or provisioning is not as much.

Q: I wanted to ask you about recovery, we are now hearing that even for Jaypee Infratech both Suraksha and NBCC have upped their offer, not by great deal, but they have upped their offer. Do you have any back of the envelope calculations on what you may make on recoveries by March 31st?

A: I am not aware of what is the latest bid, but whatever is being discussed based on that in Jaypee Infratech there is every possibility that over a period of time the lenders may be able to recover their entire money. But if you look at the time value of the money there may be some sort of what you call NPV loss or market loss because there is a huge tract of land which is being offered to the lenders. Now we saw that the announcement around the new airport which is coming in the Greater Noida area.

Lenders will have two sources for recovery, one is the securitisation of Yamuna Expressway and another is the land which lenders will get and in turn I think there is some ask about money to be given for completion of homebuyer’s project. It is like, I think that lenders over a period of time may be able to recover a good amount of money but immediate recovery may not be as high.

Q: I wanted to ask you little bit about Dewan Housing Finance Corporation (DHFL), now that it is under National Company Law Tribunal (NCLT), how much of incremental provisions will you have to make in Q3 because of this and how has the bidding been so far?

A: Overall book including bonds, we are holding more than 15 percent provision. In December we will make an assessment because the account if it is substandard there is a requirement for making 15 percent provision. So, to that extent we have already made that provision, but we will be making incremental provisions so that it gets aligned with the estimated loss.

Q: What is the interest, I mean, I know the bidders haven’t yet come in but you would be aware of the interest so far as until RBI took it to NCLT, you guys were handling it, you see enough interested bidders? We heard even Adani Group’s name?

A: There is a lot of interest. Initial interest is good because the retail franchise of DHFL was very good, the issue is all around the wholesale or the developer loans in DHFL. Let us hope for the best. There will be a process of inviting expression of interest (EoI). Whatever best offer in terms of the enterprise value is received, the administrator, committee of creditors (CoC) and ultimately it has to be approved by the regulator. So in next two months we will have clarity.

Q: Have you picked up anything at all of the government changing rules to ensure that the frauds of the previous owner of National Company Law Tribunal (NCLT) asset is not affecting the current owner. You yourself are worried about the Bhushan Power issue, but is the government coming with some such a rule?

A: Let us wait. If any rule is coming in the current session of the parliament, if any amendment bill is introduced, for IBC is introduced we would come to know but I have read the statements of the honourable finance minister and it has been widely quoted in the media that there is an intention and proposal to move an amendment under which anyone who bids for the asset, they will get a clean asset and will not be responsible for the past debts but the existing promoters will continue to be liable about their actions.

Q: Give us a view on credit growth. For the full year what can we expect, for the first half of the next year what are you looking at. Where do you see it from now?

A: Right now it is all driven by the retail and corporate because a lot of sanctioned working capital limits are there where the utilisation is around 30-32 percent. So hopefully, the demand will come for funds and once the demand comes then we will have better credit growth numbers.

Q: Mint is carrying a story that Power Finance Corporation (PFC), REC etc. will provide money to distribution companies (DISCOMs) to clear their outstanding to green energy companies, any truth to that and is green energy loans looking like turning into non-performing assets (NPA)?

A: As far as current situation is concerned, we don’t have NPA as far as our loan to the renewable energy sector is concerned, but overall there is a need that the independent power producers (IPPs) whether they are in thermal sector or renewable energy sector, they must be paid their overdues because it puts strain on their finances and it does impact the payment to the lenders. So there is an urgent need to clear their overdues and it must receive attention of all the people who are responsible for this.

Q: Any capital raising plans that the street can look forward to, any plans to announce a qualified institutional placement (QIP) anytime soon?

A: Not at all because I don’t think we need any money. We are hoping that within this quarter or latest by March 31, we will have a very good recovery in respect of many large NPAs where bank has fully provided and everything will come into our profit and loss (P&L) and given the current growth rates we will be able to fund it through our internal accruals and capital adequacy ratio of the banks, capital to risk assets ratio (CRAR) is very comfortable. So absolutely I do not see any need that in near future we will be approaching the capital markets to raise the capital.

Q: Any idea of what is the valuation for SBI Cards. We heard about Rs 28,000-30,000 crore, about Rs 40 per share, anything that you can help us?

A: I cannot comment on the valuation of SBI Cards at this stage when the initial public offering (IPO) process is going on. Let us wait. The process is going in with full vigour and let’s see how investors react to this and what valuation finally comes.