Corporate sentiment improving in early sign of economic recovery: SBI MD

The bank's PMI has crossed 50 points for the first time this month indicating that sentiment is positive

Despite the fact that the Reserve Bank of India has slashed the country’s GDP forecast for the current fiscal year to five per cent from the earlier projection of 6.1 per cent, the largest lender in the country, State Bank of India (SBI) is of the view that sentiments in the corporate sector are improving and may signal early signs of recovery.

Although the bank has not witnessed any significant change in corporate borrowing, which remains tepid, its internal analysis of the sector has indicated that preliminary signals of an uptick in loan disbursements may be forthcoming.

“We have not been able to see any significant change till now but things will start improving. SBI undertakes a Purchasing Managers’ Index study where for the first time this month, it has crossed 50 points. If the score is above 50, it indicates that sentiments are positive,” Arijit Basu, managing director at SBI said on the sidelines of Infocom.

He said that despite the ongoing economic slowdown, the bank has seen “reasonable demand” till the first two fiscal quarters this year in retail loan, which had grown by 18 per cent, but the bank’s corporate loan book has been seeing muted growth of 2-3 per cent till the first two quarters of the current fiscal year.

“It is not because that the bank is unwilling to lend but there is lack of demand,” he said.

According to him, SBI has been taking steps to contain its non-performing assets and has set a slippage target of one per cent this year in corporate sector loans. As compared to the target, the current slippage stands at 1.5 per cent.

“Corporate slippage has been a cause of worry. Till the second quarter, we have been able to keep the slippage in the corporate sector at less than Rs. 6,000 crore and hopefully for the coming quarters, it will be at this level. If we are able to do it, then the final amount of slippages will be significantly lower than last year; I think by 3-4 times lower than last year”, Basu said. 

Following the RBI guidelines on NPA provisioning, SBI has also done accelerated provisioning and as a result, as NPA cases are sorted out and bad loans recovered, the money will flow directly into the bank's profit-and-loss account which is expected to improve the lender’s profitability.

Basu said that SBI is also ready to spend any amount to enhance its technological security and has been upgrading its ATMs with a more secure EMV payment method. Out of the 58,000 ATMs which the bank has, around 30,000 are already upgraded with the latest technology to prevent card cloning and the rest of the ATMs will also be upgraded this year.

SBI has also embarked upon to open 500 new branches this year. Currently, SBI has 22,500 branches.