SBI sees gross NPAs rising after merger with associates but Chairman says no worries

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Published: February 16, 2017 4:55:32 PM

State Bank of India expects its Gross NPAs to rise from 7.23% at present to 8.7% post the merger of its five associates banks into itself, even as it has been aligning the subsidiaries books with its own since the beginning of this year to match the levels of provisioning of all the lenders.

Arundhati Bhattacharya, SBI chairman, private investment, Sarfaesi Act, demonetisation, Bankruptcy CodesArundhati Bhattacharya said that by the time the merger happens, the associate banks’ provisioning will have come up to the levels of SBI, to the extent possible. (Image: Reuters)

State Bank of India expects its Gross NPAs to rise from 7.23% at present to 8.7% post the merger of its five associates banks into itself, even as it strives to align the smaller banks’ provisioning for bad loans with its own, Chairman Arundhati Bhattacharya said on Thursday.

“Alignment of our books has been going on since the beginning of this year,” Bhattacharya said at a press briefing.
“By the time the merger happens, to the extent possible, we will have made sure that their provisioning comes up to our levels,” Bhattacharya said referring to its five subsidiaries that are to amalgamate into it.

Earlier yesterday, the Union Cabinet approved the merger of State Bank of India and its five associate banks, paving way for bolstering the business operations of the state-run lending behemoth. The merger of SBI with its associates will lead to operational efficiency within banks and will lead to reduced cost of funds, Finance Minister Arun Jaitley said at a press briefing. “SBI will become a global player post associate bank merger,” he said.

State Bank of India is the country’s largest bank, and has five associate banks, namely, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Mysore and State Bank of Patiala. Merging of another state-run lender Bhartiya Mahila Bank into SBI hasn’t been finalised yet.

Bhattacharya said she expects the merger to be completes in the next financial year 2017-18, as SBI would not want to undertake such as large exercise so close to the end of the current financial year.

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As for the capital, Bhattacharya said that the blended capital adequacy ratio of all the six banks was at 13.19% at the end of December, as against 13.73 for SBI on its own. However, she added that she was not concerned about the capital as it is well above the minimum stipulated level. Capital adequacy ratio indicates the ratio of the capital available with the bank as a proportion of its advances.

According to the current Basel III norms, banks in India are required to maintain a total capital adequacy ratio at 9%, with tier-I capital at 7%. Moreover, SBI has yet not accounted for an additional 79 basis points available with it as a result of the government’s fund infusion and retained profits in the current quarter, Bhattacharya said.

The proposed merger would propel SBI into being among the top 50 banks globally, Bhattacharya said, adding, “We believe we are creating a strong bank with cutting-edge technology.”


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