As the bank is garnering foreign currency deposits through Resurgent India Bonds (RIBs) at a fixed rate for a five-year term, it will be in a position to offer a new product to promoters of infrastructure projects, Verma said.

SBI expects the issue, which opens on Wednesday, to garner at least $2 billion. After the completion of roadshows in Gulf countries, SBI is confident of the issue meeting with success. Verma was reluctant to quote a figure of the likely amount which will flow in. "There are no targets, if we get a good enough amount, we will close the issue at the earliest closing date of August 17," he said.

Asked to quote a figure to the ‘good enough amount which will trigger closure on the earliest date, Verma said it could be anywhere between $2 to 4 billion.

The gradual depreciation of the rupee isof little concern to Verma. An annual depreciation of 3 to 4 per cent can be managed, he said. In three years time, SBI expects to touch Rs 3,000 crore in the form of net profit, which is equivalent to $1 billion, he said.

"With a balance sheet of this size we will be able to handle redemptions from our own account," he added.

Verma does not foresee any difficulty in deploying the money collected through RIBs in infrastructure projects. "There are about 50 large projects which are ready to get into the construction phase, about Rs 30,000 crore has been sanctioned to them and this money will soon have to be disbursed to these projects," he said. The demand from infrastructure projects is likely to be in the vicinity of Rs 60,000 crore in the first two years alone, he added.

Asset-liability mismatch will not be a problem as SBI is not a ‘puny bank, the chairman said. The bank has assets of about $4 billion in the overseas market and liabilities are required to support these assets, hesaid.

Notwithstanding the fact that redemptions in rupees will be allowed after the first six months and assets acquired in infrastructure projects will not mature in that period, the bank will not face any pressure on redemptions, he said.

As RIBs will offer a rate of 7.75 per cent on dollar deposits for five years, it is expected that some FCNR deposits will witness premature withdrawal, with FCNR depositors transferring the amount to RIBs. Verma discounted such apprehensions saying that conversions from FCNRs to RIBs are not expected to be more than 10 or 15 per cent of existing FCNR deposits.

Taking a question on likely problems for investors at the time of redemption, Verma candidly admitted that some unhappiness will be witnessed. "Problems arise for investors on account of succession problems when a investor unfortunately dies and the asset has to be transferred to a successor," he said. In a scenario where about two lakh applications will need to be handled over a period of 10 days some hiccupsare bound to arise, the chairman said.

INSIGHT
Managing a forex bonanza

The proposal to use the RIB kitty -- slated to cross $3 billion or Rs 12,000 crore -- to fund infrastructure projects is encouraging. The question is how attractive will be the rate of interest compared with PLR, currently around 14 per cent. The fixed rate to be offered will have to cover the rupee depreciation risk with regard to both the dollar interest payment and repayment of principal. A related issue is that infrastructure borrowers are not ready with very many projects. So the RIB funds, if brought into India, will in the first instance help boost foreign currency reserves. This will bloat money supply and also strengthen the rupee somewhat. Both may not be desirable. In the short run, SBI could park RIB funds abroad in, say, US treasury bonds, which is what RBI does with excess reserves.