 "Pratip Chaudhury, SBI")
State Bank of India (SBI), the largest commercial bank in the country, has become more cautious in lending to mid-size companies and is focusing on loan recoveries to ease the pressure of deteriorating asset quality.
Its fourth quarter net profit fell 18.5 per cent from a year earlier, due to a high loan loss provision. “What we are seeing today is possibly the harvest of what we sowed two to three years back,” Pratip Chaudhuri, chairman, said here today.
“Our analysis reveals that the accounts which were admitted to the bank below investment grade have shown a higher propensity to fall into the sub-standard category or had to be restructured. Therefore, the entry norms for mid-corporates have been strengthened. We are generally discouraging any large exposure to accounts below investment grade. If at all it has to be made, it will be against collateral,” he added.
Senior executives said in the past three to four months SBI has not offered loans to mid-size companies with ratings below investment grade.
The gross non-performing loan ratio in the mid-corporate segment at the end of March was 8.67 per cent, the second highest after the bad loan ratio in the farm sector.
The bank is focusing on stepping up recoveries. It has introduced an incentive scheme for employees to address bad loans. The bank recovered Rs 385 crore loans in January-March, compared to Rs 229 crore in the previous quarter. In 2012-13, loan recoveries amounted to Rs 1,066 crore, compared to Rs 962 crore a year earlier. “Whatever was forgotten money has started coming back,” Chaudhuri said.
He added that tight lending norms and focus on recovery is helping the bank improve the asset quality.
While the gross bad loan ratio had deteriorated by 31 basis points from a year before to 4.75 per cent, it improved 55 basis points (bps) sequentially.
Similarly, the net bad loan ratio increased by 28 bps year-on-year to 2.1 per cent but improved by 49 bps from a quarter earlier.
Chaudhuri, however, warned that the credit quality stress might persist for some more quarters.
“We don’t know what will be the trajectory of our existing loan accounts. There are challenges in agriculture, mid-corporates and the small and medium enterprise sector...I think the restructuring problem is also quite serious and the companies that have fallen into (this) category will be there for a long haul,” he said.
He said around 25 per cent of the bank’s restructured loans had slipped into the NPA category. It was only 15 per cent a year earlier. “The share of non-performing assets in the restructured portfolio has escalated and it is a concern,” he said.
The bank’s total restructured loan portfolio was Rs 43,111 crore at the end of March.
