State Bank of India, the country?s largest bank is now focusing on non-performing asset (NPA) management for its performance during 2011-12. Diwakar Gupta, CFO, SBI, speaks to FE?s Sitanshu Swain and Kumud Das about the bank?s strategy on various issues.

When you are planning to announce your rate hikes?

We are waiting and watching. Also, the figures for Q1 were yet to come to us from where we will know the exact position on net interest margin. Our Alco is almost meeting everyday. We will take a decision at the right moment.

What is the status of the rights issue. Is there a plan-B for the raising funds if government doesn?t subscribe the issue?

The rights issue is very much on the track. Government has not told us yet that it will not give us the money. Still, we are also having plan-B ready with us in case we don?t get money from the government. We can raise money in the form of perpetual bonds IPDI under tier-I, we can also go for raising funds under tier-II.

As we have just R4,400 crore under tier-I, we can go for another R6,000 crore in tier-I. Similarly, we have got a headroom of raising capital to the tune of R14,000-15,000 crore under tier-II. But we have not taken any decision as as yet. I think, we will have better understanding by the end of the second quarter. We need around R16,000-17,000 crore of extra capital this year to do our business.

How do you see the Q1 results?

Though, we are yet to get the results, I don?t see any dramatic change coming in. I do hope that the results in Q1 will be better than that of Q4.

Do you expect a slowdown in credit and deposit during this financial year?

We are targeting a credit growth between 16-18% for this financial year. We may achieve slightly above the projections made by us. Asset quality is going to be our focus during this financial year. We are expecting more income from recovery and good NPA management. Consolidation is going to be a significant part of our business strategy for this financial year.

What about provisioning in various aspects?

We will have a provisioning of of over R2,000 crore in Q1. We have to make a higher provisioning on standard assets to the tune of R500 crore. Also higher provisioning on sub-standard assets or doubtful assets will be to the tune of R1,000 crore. Moreover, for counter cyclical provisioning another R550 crore has to be done. We have created a counter cyclical provisioning of R3,430 crore by the end of quarter ending in September 2011.

Do you have large NPAs in real estate sector?

We don?t have any stress on real estate, including commercial real estate. Our total retail housing loans is to the tune of R86,000 crore as on March 31. SBI?s sectoral cap for the real estate exposure is at 20% of its our loan book and the commercial real estate shouldn?t exceed 3% of that limit. But our current exposure is merely 1.8%. There is no concentration risk on commercial real estate for SBI at all.

What kind of exposures you have for the infra sector?

Our current exposure to the sector is at 12% of our loan book.

What is the status of your exposure to the power sector? Any NPA expected from this segment?

Our exposure to the power sector is R30,000 crore. These projects include those units that are under execution and even those on stream. Suppose, if a power plant is faced with coal linkage problem, then certainly it is not our failure. A sum of R7,000 crore has been lent by us to various state electricity boards (SEBs). We don?t have any significant NPA pressure on our power portfolio.

How much restructuring was done by your bank during the period of global financial crisis?

Our restructured portfolio comprises a sum of R34,000 crore. Out of it, a sum of R18,000 crore has been restructured as per RBI guidelines and the remaining sum of R16,000 crore has been restructured by our own. These are all standard assets. Though, there is no restructuring after that, we are open to the option as business failures keep on happening in our system. But it doesn?t mean that there our asset quality is bad and also, it doesn?t mean that our loan appraisal system is bad.