New Delhi: The country now has another monthly economic index, with the State Bank on Tuesday launching a tool that will primarily track manufacturing activity to offer a forward-looking economic trends.
The SBI Composite Index rivals the existing data point from British lender HSBC. The SBI index has been developed on the basis of the bank's internal loan portfolio, which mirrors the credit demand in the country, and other data sets available in public domain.
"The Index will analyse data from both manufacturing and services industries to determine expansion or contraction in the economy," SBI Chairperson Arundhati Bhattacharya told reporters in Mumbai while announcing the product. The bank has created two indices - the SBI Monthly Composite Index and the SBI Yearly Composite Index. Both fulfil complementary purposes such as month-on-month sentiment movement and year-on-year growth forecast, respectively.
The index will also take into account other indicators of economic activities such as consumer spending, mining, interest rates, inflation and exchange rates on a monthly basis. The indices will be released every month post-RBI's credit growth numbers, she said, adding the data collection will not be outsourced as is the case with the HSBC data. Markers at present depend on HSBC India Purchasing Managers' Index (PMI) and HSBC India Services Business Activity Index to get clues about economic trends.
The Index will help policymakers and market participants to identify turning points in the manufacturing cycles in advance and adjust their investment plans or strategy, Bhattacharya said, adding it will not preempt anything. Bhattacharya said a repo rate cut by the Reserve Bank may not have much of an impact on bank's cost of funds as lenders are borrowing very little from this window now as there is no demand for overnight money. "If you see the liquidity condition of the banks, they are hardly taking anything from the repo," she said.
Though repo rate gives a signal that things are looking to pick up but it does not make a difference in banks' cost of funds because banks borrowing from repo window is minuscule, she stated. "I don't think a repo rate cut is going to make any big difference in our cost of funds. So, a 25 or a 50 bps cut doesn't really make all that a great difference," Bhattacharya said, adding that softening of money market rates does not have any impact on the bank as it doesn't access the market.
"All the banks are much more dependent on deposit rates rather than the money market borrowing and that is why deposit and rate of deposits play an important role for us." Last week, RBI Governor Raghuram Rajan had chided banks not passing on the low interest rates to customers, thereby preventing monetary transmission, despite a steep 70 bps fall in money market rates since July.
Talking about the aviation industry, Bhattacharya said it is a very tough industry and it is not made easier with the kind of rules the country has.
On a specific query on SpiceJet, she said SBI does not have any exposure to the airline.
The troubled airline in the September quarter report had mentioned SBI, Allahabad Bank, HDFC Bank, ICICI and City Union Bank among others as its lenders. Asked whether the bank will be looking at unlocking its value in its insurance businesses, Bhattacharya said, "Right now I don't know whether we will be doing it or not, but definitely we will look at the roadmap". The much-awaited report of the Parliamentary Select Committee is believed to have endorsed most provisions of the Insurance Amendment Bill, including a composite cap of 49 per cent for FDI and other foreign investments. "We have to find out what our JV partners want. We have already talked to them but we have to see how it goes. We need to have some surety that the Bill is passed and only then things will be crystallised.
