Stressed assets: Lenders may create bad bank, says SBI chief

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Published: May 8, 2020 2:01:05 AM

In an interview with CNBC TV18, Kumar said the time is right to set up a structure, along the lines of a bad bank, given there are adequate provisions for existing non-performing assets (NPAs).

“Today, at least we have adequate provisions and the net book value is hardly 10-15% of the gross NPAs,” he said.“Today, at least we have adequate provisions and the net book value is hardly 10-15% of the gross NPAs,” he said. (File image)

State Bank of India (SBI) chairman Rajnish Kumar on Thursday said that lenders are toying with the idea of creating a bad bank to deal with stressed assets. In an interview with CNBC TV18, Kumar said the time is right to set up a structure, along the lines of a bad bank, given there are adequate provisions for existing non-performing assets (NPAs). “Today, at least we have adequate provisions and the net book value is hardly 10-15% of the gross NPAs,” he said. Meanwhile, the lender continues to make provisions for exposures where it is granting a repayment holiday.

“Around 20% companies have asked for a moratorium so far,” Kumar said. At a meeting on Wednesday, SBI decided to give select NBFCs a repayment break. At the end of December 2019, SBI’s exposure to NBFCs was Rs 1.69 lakh crore. The Reserve bank of India (RBI) had, in late March, allowed banks to provide moratorium on term loan installments for three months starting March 1.

The SBI chairman expects an announcement from the government on MSMEs shortly saying the next round of relief measures would be for this segment.

Kumar expects FY21 to be no different for the bank from FY20 in terms of the performance. An internal assessment, he said, had shown the results this fiscal would be close to that in FY20. “We may be as good or as bad as March 2020, but not as bad as FY19,” the SBI chief observed. The public sector lender clocked a net profit of Rs 10,907 crore in the nine months to December 31, 2019.

The SBI chief observed that the response to the first tranche of RBI’s targeted long term repo operations (TLTRO) 2.0 of Rs 25,000 crore had been muted because banks did not want to borrow at the repo rate of 4.4%, as funds are available cheaper. “If over Rs 8 lakh crore is parked with RBI at 3.75%, no point borrowing at higher rate,” Kumar said. The regulator received bids worth Rs 12,850 s against the notified amount of Rs 25,000 crore, in the first tranche of TLTRO 2.0.Kumar also said that SBI was ready to help Yes Bank raise funds within limits, depending on the structure.

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