India's largest lender,State Bank of India,has identified its key challenges of 2009-10 to be meeting capital requirements,bringing the cost-to-income ratio under control,and absorbing new recruits. "Meeting capital requirements is a challenge in the new year. We need to raise additional capital for funding our balance sheet growth,our subsidiaries and acquisitions," SBI Chairman O P Bhatt said at an analysts' meet yesterday. SBI had earlier said that it plans to raise around Rs 20,000 crore this fiscal and might need Rs 50,000-70,000 crore over the next five years. Bhatt said that the bank had enough cushion in its Tier II structure to raise funds. As on March 31,2009,SBI's capital adequacy ratio (CAR) under Basel II is 14.25 per cent. The CAR is the ratio of a bank's capital to its risk-weighted assets. On acquisitions,Bhat said that the bank receives a lot of offers,but there is nothing concrete on hand now. "We will not go for acquisition for the sake of it or just increasing the number of branches. We will acquire only if it serves the purpose of strengthening our business," Bhatt said. Leading Indian banks,particularly in the public sector,seem to be looking to increase their overseas presence either by opening new branches & representative offices or through acquisitions,on strong balance sheets,a Boston Consultancy Group official said. Bhatt said that the cost-to-income ratio has improved by 241 basis points from 49.03 per cent in FY'08 to 46.62 per cent in FY '09. This is on the back of a 515-basis-point improvement last year,he said. The bank plans to up its headcount by 13,000 this fiscal,Bhatt said,adding,"our challenge now is to integrate and deploy them effectively into our system". The bank has 2,05,000 employees and around 8,000 personnel retire every year,Bhatt said. "The planned growth in headcount is totally need-based," he said. Stress in some sectors of the economy like real estate could lead to an increase in NPAs,Bhatt warned. The gross NPA ratio and net NPA ratio of the bank improved from 3.04 per cent in March 2008 to 2.84 per cent in March 2009 and to 1.76 per cent in March 2009 against 1.78 per cent in March 2008.
