Bad loan pressure at public sector lender State Bank of India (SBI) is not entirely over and there are chances that non-performing assets (NPAs) could increase in FY17, chairman Arundhati Bhattacharya said on Thursday.
Speaking to reporters on the sidelines of the bank’s annual general meeting (AGM) here, she said: “There could be pains as well, still because once you have classified an account, the numbers we have taken are basically on the fund-based part but the non-fund based part also gets converted subsequent to classification.”
SBI’s asset quality had deteriorated in Q4 FY16, with gross non-performing assets (NPAs) as a percentage of gross advances rising 225 bps y-o-y to 6.5%. Net NPA ratio also witnessed a y-o-y rise of 169 bps. The largest chunk of NPAs came from the mid-corporate segment, which reported a gross NPA ratio of 17.12%, followed by agriculture at 6.93%.
According to Bhattacharya, FY17 is also going to be difficult but what gives her hope is that policy initiatives which had begun last year and those that are continuing. “Not only that there are some good triggers on the horizon. One of the triggers of course is the monsoon; the second trigger is the 7th pay commission which is expected to ramp up demand in the country,” she explained.
Bhattacharya added that the bank is seeing demand in certain segments, commercial vehicles, power generation and if it becomes a little broadbased, it will be definitely be good for the country. She said that given the kind of impetus that the government is giving for various projects, the bank hopes for 12%-13% credit growth.
On the RBIs’ S4A scheme, she said that the bank was looking at all of the companies and since many companies have not submitted their audited balance sheets, the process will take some more time. “If we find companies we will do it and there is no question of fitting them in even if they don’t find. The way S4A has been given obviously they are relying on current cashflow,” she said.
According to her, only completed projects should be treated under S4A because there is a concept of existing cashflows. “Projects that have not yet been completed will not have cashflows, so we need to look at units where projects have been completed,” she said.
She explained that there could be many companies where the sustainable debt is higher than 50% of their total debt. “S4A clearly says that we will have to do a TEV study and a forensic audit. So without doing the TEV and the forensic there is no point looking at the numbers,” Bhattacharya said.
Asked about a possible extension of her term at the bank, she said that SBI has a very good line-up of people. “SBI is very well provided with talent,” she added.