In terms of resolution of stressed non-banking financial companies (NBFCs), options before banks are quite limited, Rajnish Kumar, chairman, State Bank of India (SBI), told reporters on a conference call after the lender’s Q1 results. It is not entirely impossible to resolve three large stressed accounts identified this year by the end of Q2, he added. Excerpts:

What are the bank’s recovery estimates?

As far as recovery estimates are concerned, last time was the same situation. Rs 16,000 crore, it can come. Every quarter, I am looking towards the sky and the Gods and praying will I get all those decisions and recover this money. These are three NCLT accounts.

Could you elaborate on the resolution process of a large NBFC and the procedural difficulties with respect to dissenting lenders?

The 7th June circular sets a deadline of six months. All these accounts, either they will be resolved within the six months or will land in NCLT or whatever legal remedies. So, that is the time frame.

As far as lenders, insurance companies, NBFCs, ARCs are concerned, they are all covered by ICA. But mutual funds are still a greyish area. But, in any account, or for that matter NBFCs, they are not covered by NCLT. There is RBI, which will have powers to resolve. Secondly, if it is a secured asset, and I am holding a security, I have an option to go to DRT. Or, align with other banks, whether I sign ICA or not. If there is a resolution plan, I can evaluate and be part of that. So, it is a choice. But, anyone who wants to go to DRT will have to evaluate what they gain out of it. Whether they will be better off or better off as part of the resolution. The only difference is for everybody else, ICA signing has become mandatory. For mutual funds, it is not mandatory as on date. But choices for NBFC sector are also very limited. And DRT we know how many years it takes to recover. So, it is a choice. We (banks and MFs) are at par in terms of security. Everybody has a right to dissent or fall in line.

Outlook on asset quality?

Gross slippages are likely to be below 2% by the year-end.

How confident are you about resolution across three specific accounts, including DHFL and Zee?

The time frame starts from 7th June. And, six months means 7th December. In resolution, there are multiple lenders and the number is huge. All lenders are keen that the resolution happen as quickly as possible. The contours have already been drawn. And implementations will need to be followed. Many of them are listed companies. And as such there are many formalities, which have to be complied with. So, 30th September, I would say not entirely impossible but it depends on how quickly the approvals come from the various lenders and wherever regulatory requirements are there they will have to be fulfilled. Based on that, the possibility of 30th September seems a bit difficult but not impossible.

What is the state of lending to the auto sector?

Yes, we are seeing the data that the sales have gone down. So both sides, which is dealer finance and auto financing… but the exposures compared to the size of the balance sheet, there is no concentration risk per se. We had taken a decision in February-March itself and there has been no increase in exposure or NPA. Even SMAs also are at a very comfortable level. The bank is very supportive of the sector. If there is some build-up in the inventory we are okay. If it is covered by inventory, we have no hesitation if we are being paid maybe 60-75 days late. The overall dealer financing exposure is about Rs 11,500 crore.