Worried at the growing delinquencies in the mid-corporate advances portfolio, the country?s largest lender, State Bank India (SBI), is going slow on lending to this segment.
SB Nayar, DMD and group executive of corporate banking at SBI, conceded the bank was being cautious in expanding mid-corporate loan book. This is reflected in the loan growth numbers for the April-June quarter. While the public sector bank saw an overall advances book growth of 19% year-on-year (y-o-y), the mid-corporate segment grew a much slower at 6.3% y-o-y. However, Nayar did not elaborate on how slow the mid-corporate book could grow this year.
SBI reported one of its worst quarters in terms of asset quality in the April-June quarter, with incremental growth in gross non-perfoming assets (NPAs) standing at R10,840 crore compared with an incremental slippage of R6,122 crore in the same quarter last year. This is an increase of 77% y-o-y in incremental slippages. The overall gross NPA level for SBI at the end of the quarter stood at R47,200 crore, or 5% of the advances book, compared with a gross NPA level of R27,768 crore, or 3.52% of the advances book, in the April June 2011quarter.
The corporate sector, led by mid-corporate borrowers, contributed around a-third of these fresh slippages in the quarter.
Gross NPLs for the mid-corporate segment was 9.3%. Nayar said various constraints including the stalled reform process, weak investment climate and supply side bottlenecks are affecting health of mid-corporates. Mid-corporates account for about 20% of SBI?s loan book.
He added that in the case of large corporates, though asset quality is intact, the demand for loans remains tepid. The 24% yoy growth in loans to large corporates in April-June was mainly on account of loans to the oil companies, said Nayar. Gross NPA levels of large corporates stood at just 0.2% at the end the Apr-June quarter.
Slippages for SBI are broad based with the top-50 accounts accounting for R3,000 crore of slippages, a Credit Suisse report notes.
The higher slippages were witnessed in the pharma (R950 crore), infrastructure (R790 crore), engineering (R640 crore) and textile (R480 crore) industries. The slippages from restructured accounts were also higher during the quarter at R1,300-1,500 crore. The other segments facing loan quality stress for SBI includes small and medium enterprises (SME) loans and agricultural loans which have NPL levels of 7.2% and 9.8% respectively. Of the slippages in corporate and SME segments, management expects R2,000-3,000 crore to be upgraded in subsequent quarters. Overall, the management expects to contain net slippages to R3,000 crore in the second quarter if financial year 2013.