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Can SBI buy Paytm Bank? Know what SBI MD said


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State Bank of India (SBI), India’s largest lender, is actively reaching out to merchants and retailers through its payments subsidiary, SBI Payment Services Pvt Ltd, to ensure business continuity for them. This move comes in response to regulatory restrictions imposed on Paytm Payments Bank.

What SBI MD said?

Dinesh Khara, the Chairman of State Bank of India (SBI), stated on February 3 that SBI has not communicated with Paytm Payments Bank regarding the transfer of business. He clarified that Paytm Payments Bank is maintaining some accounts with SBI.

The Reserve Bank of India (RBI) recently took actions against Paytm Payments Bank, restricting certain services effective from March 1. Despite this, Khara refrained from commenting on the possibility of SBI acquiring a stake in Paytm Payments Bank.

Vijay Shekhar Sharma, the founder and CEO of Paytm, mentioned on February 1 that the company is in discussions with banking partners to transfer the business of Paytm Payments Bank. He noted that several large banks have offered support, and decisions about changing partner banks will be made in the coming weeks.

SBI Chairman, Dinesh Khara, announced the initiative after revealing the bank’s Q3 FY24 financial results. Given recent regulatory actions against Paytm Payments Bank, SBI aims to capture a larger share of the merchant market by offering services through its payment subsidiary.

SBI’s Payments Subsidiary – Key Player in Merchant Services

SBI Payments, with over 2.93 million merchant payment acceptance points and 1.14 million PoS machines, is among the largest acquirers in the country. This proactive approach is timely, seizing opportunities arising from regulatory challenges faced by Paytm Payments Bank.

SBI’s Q3 FY24 Financial Results

SBI reported a net profit of ₹9,164 crore for Q3 FY24, a 35.5% decline from the previous year. This decline is attributed to a one-time provision for pension and ex-gratia benefits of ₹7,100 crore.

Khara explained that the provision was made due to the pending court case related to pension entitlements for employees. The bank provided an additional ₹5,400 crore for the increase in pension for all employees, awaiting formal notifications.

Despite the decline in net profit, SBI reported a 4.6% rise in net interest income to ₹39,816 crore. Domestic net interest margin contracted but the bank showed a 14.5% YoY growth in domestic advances, with a loan book of ₹35.8 trillion.

Focus on Corporate and Retail Loans

SBI emphasized broad-based credit growth, with a credit growth target for FY24 retained at 14-16%. Retail loans grew 15.3% YoY, reaching ₹12.96 trillion, while corporate loans showed a growth of 10.7% YoY, totaling ₹10.2 trillion.

Deposit Growth and CASA Ratio

SBI witnessed a 12.8% YoY growth in domestic deposits to ₹45.7 trillion. Term deposits outpaced CASA growth, leading to a sequential decline in CASA ratio to 41.18%. SBI attributed this to customers seeking higher interest in the increasing interest rate environment.

Future Opportunities in Corporate Borrowing

Khara expressed optimism about opportunities in corporate borrowing, driven by infrastructure spending and new initiatives like solarisation. The recently announced interim budget provided reassurance on infrastructure spends.

Outreach to Wealthier Segments for CASA Growth

SBI made efforts to reach wealthier segments of society to bolster savings accounts amidst the changing interest rate environment. The bank aims to enhance its CASA deposits and maintain a strong financial position.

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