High bad debts temporary, says SBI

Written by Press Trust of India | New Delhi | Updated: Dec 17 2012, 02:12am hrs
Attributing rising bad debts to the economic slowdown, State Bank of India (SBI) on Saturday said that high non-performing assets (NPAs) are temporary. NPAs continue to be a challenge. But I dont want to put a number to it. I can only tell you that a large part of the NPAs is really because of the external economy, and I would think that they are temporary only, said SBIs managing director Diwakar Gupta on the sidelines of the Delhi Economics Conclave here.

SBIs NPAs rose to 5.15% in the second quarter ended September from 4.19% over the year-ago period because of deteriorating asset quality. He said the bank has made adequate provisioning norms. We have been providing in excess of the prudential provisions. Whatever the Reserve Bank asked us to provide, we have been providing that, plus a little more, he said. The Reserve Bank recently increased the provisioning for standard restructured assets for banks to 2.75% from 2%.

Replying to a query on Kingfisher Airlines revival plans, SBIs managing director said there is no need to panic as long as there are assurances from the airline. Kingfisher has been a good airline at some point of time. They are going through their set of problems. And there is no reason for bankers to panic as long as they say that they are looking for a solution. The assurance only is that they are trying, he said.

SBI is the lead banker in the 17-lenders consortium that extended R7,000-crore loans to the now-grounded Kingfisher. The lender has an exposure of R1,500 crore to Kingfisher Airlines, which has not been serviced since January this year. Kingfisher has not reported any profit since its inception in 2005. It has debt over R7,000 crore.

Gupta also said that the Reserve Bank, in its mid-quarter monetary policy review on December 18 this year, should consider cutting both the repo rate and cash reserve ratio (CRR). As a banker, I can always say that our wish-list is that the rate should change, they should reduce both repo and CRR, he said. Repo is the rate at which the RBI lends money to the banks. It is at 8% currently. He said that the RBI has already reduced the CRR fairly, though, some more cut would be good. CRR has already been brought down significantly by the Reserve Bank; if they do a little more, that will be great. Repo cut will actually bring down the rate systematically in the system. So deposits will be cheaper, therefore, people will lend cheaper. Overall, there will be a downward bias which has been required, he added.

CRR is the portion of deposits banks have to mandatorily park with the RBI, which is at 4.25% currently.