Unlike most other lenders, India’s largest bank, State Bank of India, posted a decline in stressed assets year-on-year as its chairman Arundhati Bhattacharya’s stringent appraisal policies filtered out potential weak assets. At a press conference on Friday after announcing the bank’s third-quarter financials, Bhattacharya provided an outlook on credit growth, going forward.
Can you give some guidance on the growth in corporate, mid-corporate and SME sectors?
For the next two quarters, growth will remain a little muted. In respect of SME, we have consolidated and changed our entire product suite to risk mitigated products. We have done an initiative with BCG on SME suite where we changed not only the processed but also the products. That rollout is now complete in eight circles and will be complete in all 14 circles by March. We expect growth after two-odd quarters.
We to wait for projects to come into corporate and mid-corporate sectors. The corporate growth you have seen is on the back of certain amount of takeover finance where we have refinanced completed projects and for completion of stuck projects. The real growth will come only when the projects come in. We are now seeing a trickle of new projects in the renewable energy space coming in. We are now being approached for pipeline projects. I believe, in another two-three quarters, we should be seeing growth in the credit book.
What is your outlook on NPAs?
We would like to say it would remain down, but we have to also understand that the topline has not really increased much. Had the topline seen the kind of robust increase that we normally see, the percentages would have been down. But having said that, with all the recovery efforts we are taking, we hope that we will be able to keep it under control. I don’t really want to say the worst is over, it’s a little premature. We have to wait for a quarter or two.
We also have to understand that the quarter after next, anything we restructure will have to go in the NPA book, so there will be no standard restructured assets. We have to weigh that in too. But we are confident we will be able to hold the book and, going forward, on account of the fact that we are facing more and more risk mitigated products in our books and much better monitoring systems, we hope we will show better numbers as we go ahead.
You have a significant treasury gain in the third quarter. Comments?
Allocation to G-Secs and equities has gone up quite a bit. We have allowed R36,000 crore more in the treasury area on an average compared with the earlier years. So, obviously, the allocation to treasury has increased because the pickup on the credit side is lower. Hopefully, as the allocation comes back to the credit side, there should be a yield pickup there and we are hoping that it will happen sooner rather than later.
With the end of forbearance on restructured assets from April 1, are you advising companies to opt for restructuring?
We are not telling any company to go for restructuring, but are taking a hard look at our entire portfolio to see whether there are companies that are not able to sustain. We really don’t have to tell companies to do something that they themselves realise. But we are assessing our books as well. It’s not a question of compelling anyone to go for restructuring. Only if we feel it’s a problem and they will benefit by things being restructured, then we sit with a company and take a decision.
How prepared are you for the provision when the rules come into effect?
We are quite prepared. We have even done a sensitivity analysis to see how much it will impact us and I don’t think it will be hugely material.
Do you see an increase in restructuring?
I do not see a spike yet, but that’s why I am giving a larger number than what’s actually in the pipeline. I don’t want to say R3,800 crore and, then, come back with something more — that’s why I am saying that around R5,500 crore maybe the number.
With the muted credit growth, when do you see the rate cut transmitted by the banks?
I don’t think a rate cut is holding it back. Projects have to come on the ground. I have said earlier too that it will take a little time for rate cuts to transmit. The RBI governor has said the same. I believe the rate cuts will transmit themselves sooner than later. It may not be immediate, but it will happen. Will help sentiments? I don’t think 25 or 50 bps will actually materially alter people’s decision to invest. The investment decision depends on a large number of other things, including the ease of doing business, policy initiatives and clarity as to how and when things can happen, and as those things become better, I am sure he projects will start coming in. If we also see a credit pickup, the competition will gear itself up and automatically rate cuts, if required, will be done.