Recoveries were slightly muted in the first quarter because of the economic condition, but we are expecting it to significantly rise.
The SME and the lower end of the mid-corporate segment is where State Bank of India (SBI) sees risks emerging, chairman Rajnish Kumar said in an interaction with media on Friday. SBI sees up to Rs 11,000 crore in recoveries in the next two quarters. Edited excerpts:
You have said you do not want the moratorium to continue. As far as restructuring is concerned, have you got a sense of which accounts you would refer under that?
I don’t have any sense as of now. There are lot of discussions going on. Every day, there is a news item. In the banking conclave of State Bank of India I had made my views very clear that after August 31, moratorium is not required and that is what Deepak Parekh also mentioned and that is the view from most of the bankers and the non-banking financial companies that six months’ moratorium was good enough and from September onwards, repayments should start coming.
How did you achieve this very sharp growth of 16%-odd growth in your book of Rs 34 lakh crore outstanding deposits?
Deposits, as I said and I always say this in every quarter that bank’s liability franchise today, is the strongest. The investment which we have made in the technology, the qualitative improvement which we are continuously trying to bring as far as the customer service is concerned, many customer-friendly steps, which bank has taken, say for example, there was a big issue around charges on monthly average balance. So we decided we will not ask for any monthly average balance because that is very inconvenient to the common citizens and the customers of the bank. So the philosophy of the bank that provide if not the best, but at least a reasonable quality of customer service, and at a very affordable price and in a very transparent manner.
So that is what I believe has strengthened the trust of our customers and we continue to add customers and that is where the savings account growth is coming from, supported by our vast distribution network, additional platforms, which is a very convenient platform and current accounts, there is a big push for cash management products. So there are all these factors that despite not being among the banks who pay very high rate of interest, with all these factors we are getting this kind of growth.
Based on your SMA book and stress tests, do you have a sense of how asset quality might shape up after the dispensation ends?
Our numbers are very much clear. That’s what we have given you the sense that out of the term-loan book, who are the clients who have not paid in the sense of the actual performance, there is no confusion who has opted in, who has opted out. Our formulation is that if somebody has paid me two instalments or above, so he will continue to pay. Somebody out of this who has paid zero or one instalment, some of them will pay, some of them will not pay.
So any corporate, they can maybe sustain for one quarter, two quarters, but if a situation develops that there is a prolonged recession or a prolonged recovery or a recovery does not happen, then there may be situations where the corporate slippages may happen. But, the book of the bank, the composition, as compared to what happened in 2017-18, is very different and retail book, because last year we did lot of clean-up in the agriculture. But, suppose in SME there are elevated NPAs. That is a segment that in fact we have to watch out very closely, but a lot of help is also coming to the SMEs from the government in different forms and shapes and the SME and the lower end of the mid-corporate. That is the segment where, as on June 30, the number is not very large. But, this is the segment where maximum alert is needed.
What are your expectations on recoveries?
Recoveries were slightly muted in the first quarter because of the economic condition, but we are expecting it to significantly rise. It was around Rs 440 crore, but throughout the year we are expecting it to significantly rise. As of now, given the moratorium that we have, we are not expecting any fresh addition to the slippages. For one large chunky account we have taken the hit in June and we are expecting a very good recovery in the third quarter, where the matter is in the final stages of decision in the Supreme Court. We are looking at Rs 10,000-15,000 crore which we believe that in next two quarters, for about Rs 11,000 crore, where there is a high visibility. There is Rs 3,000 crore Covid provision. So we are looking at a Rs 14,000-15,000 crore cushion for the bank.