SBI targets reduced NPA levels

The State Bank of India (SBI) is targeting to reduce its net non-performing assets (NPA) to net advances ratio to about 2 per cent by March 2005, down from the current 3.48 per cent.

Apart from strengthening the balance sheet, a below 3 per cent net NPA means that the bank would have freedom to declare a high dividend without the prior approval of the Reserve Bank of India.

The country's largest bank is planning to climb to global standards and touch the 1 per cent mark by March 2006.

"We want to reach a net NPA level of about 2 per cent by March 2005. By March 2006, we want to reach the global benchmark of 1 per cent. That would make us on a par with developed markets," said bank officials. Net NPA to net advances at 2 per cent would work out to Rs 2,500 crore.

Gross NPAs of the bank has been at Rs 12,000 crore. As on March 2004, the net NPA ratio stood at 3.48 per cent, down from 4.5 per cent in March 2003.

SBI plans to achieve a lower net NPA level through higher advances, higher recoveries and sale of assets to the Asset Reconstruction Company of India Ltd.

The bank is aiming to make recoveries of Rs 2,200 crore through compromise proposals and court proceedings.

Meanwhile, I G Patel and Ajay Piramal have been reappointed to the SBI board. Their terms expired in the recent past. Other members of the SBI board include C Bhattacharya, Ashok Kini, K P Jhunjhunwala, P R Khanna among others.

SBI has a window permanently open for one-time settlements. It has made recoveries worth Rs 500 crore so far in this fiscal from the agricultural and small scale sectors, said sources. The target for recoveries is rather ambitious since in the year ended March 2004, the recoveries totaled only to Rs 1,600 crore.