SBI raises target for buying NBFC retail loans to Rs 450 bn from Rs 150 bn

Flush with funds, country’s largest lender State Bank of India has tripled its target to buy good quality retail asset portfolio from finance companies to Rs 450 billion from earlier target of Rs 150 billion.

While it provides liquidity to finance companies facing resource crunch, the SBI gets an opportunity to expand loan book at higher pace.

Chairman Rajnish Kumar said the bank has stepped up target for purchase of good quality portfolio of assets from NBFCs. There is a good opportunity to expand its loan portfolio at attractive rates. This will also provide much needed funding support to the finance companies facing liquidity problems.

“We are looking for opportunities both in priority and non-priority sectors. Bank had initially planned for a growth of Rs 150 billion through portfolio purchase during the current year, which is being enhanced,” the SBI said in a statement.

According to the bank’s internal assessment, there may be an opportunity to buy additional portfolio in the range of Rs 200 billion to Rs 300 billion.

Another senior SBI executive said these finance companies need the money immediately. So the transactions (buying portfolio) are expected to happen in a month’s time.

If the bank will surpass the loan growth guidance of 10 per cent for FY19, the chairman said in these circumstances (read liquidity crunch of finance companies), that may happen. The bank has the capability to lend and also have comfortable liquidity and capital base. About 12 per cent growth (growth in credit) is quite feasible for FY19, Rajnish Kumar said. At present, the SBI's guidance for credit growth in FY19 is 10 per cent.

Bankers said with priority for managing liquidity, the pace of loan growth by finance companies may slow down, which is an opportunity for banks backed by deposit money.

The loan purchase will expand the book. But this is not going to be at the cost of growing balance sheet organically that is through branch network, the SBI chairman said. The busy season (October-March) will see rise in demand for credit.

The credit to deposit ratio of SBI stands around 66.5 per cent. Gross Advances at the Whole Bank level registered a growth of 5.49 per cent from Rs 18.86 trillion as on June 2017 to Rs 19.90 trillion as on June 2018.

Deposits of the bank increased by 5.58 per cent from Rs 26.02 trillion as in June 2017 to Rs 27.47 trillion as in June 18.

DEA Secretary Subhash Garg tweeted, “SBI today stepped up substantially a facility for purchasing portfolio of assets from NBFCs to provide liquidity to NBFCs. SBI would buy such portfolios up to a total amount of Rs. 45000 cr (~450 billion). This measure should alleviate liquidity concerns to a great extent.”