Interacting with mediapersons after announcing the September quarter results on Friday, SBI chairman Arundhati Bhattacharya said she expects loan growth to remain muted over the next few quarters. Excerpts:
Slippages fell in the quarter. What was the contribution of the agricultural sector?
The improvement was seen across sectors. However, there was a bit of spike in the agriculture sector, which still faces a lot of stress. We are hopeful that in the next two quarters, there will be a substantial pullback as instalments for the debt waiver in Telangana have come in. We expect instalments from other states soon.
When do you expect the asset quality to improve?
I don’t think there will be a sharp improvement in the asset quality as the downturn was deep. It will be a gradual improvement. Once the demand cycle turns, things may happen at a faster pace. For the pace to pick up, it may take another 12 months.
How do you see loan growth shaping up in the next two quarters?
Loan growth had been muted and if you look at the working capital and commercial paper (CP) markets, you will know where the capital is coming form. The CP market is for the short term and people prefer it for its cheaper rates, which are below the base rate. The trend is likely to continue till the rates remain same.
Which sectors have contributed to the bank’s net profit growth?
Net interest income and non-interest income have grown reasonably well. Our expenses are well controlled and have gone up a mere 2.23%. Interest income rose 9.85% and non-interest income rose 39%. In the second quarter, advances rose 9.07% y-o-y, and in the first-half period, interest income rose 12.35%. Basically, there is a better pricing of risk and, therefore, the better numbers are a result of them.
Is there a concern over debt recast after restructuring forbearance ends in March 2015?
There is no reason for the bank to worry. If we need to restructure our debt, we have to do that under different rules. The concern is that the economy has not fully revived and, restructuring needs to be done.
Why did the sale of bad loans to asset-restructuring companies go down substantially?
ARCs did a large amount of business in the last two quarters before RBI brought the regulation that they have to give 15% cash upfront. The ARCs need to be capitalised, which means they have to raise money or get into joint venture with someone. These things cannot happen overnight. The ARCs are being selective as they cannot afford to get 15% cash upfront and the cash they are offering is way below our expectations. That is why sale to ARCs is not happening.