Friday, August 24, 2012

SBI chief wants NPA rules tweaked

Kolkata, August 23: State Bank of India (SBI) chairman has called for a change in non-performing assets’ (NPAs) norms. “There is a need to change the norms relating to NPAs. We should not see a ghost in everything,” said Pratip Chaudhuri.
“For instance, a company has taken a two-year loan to install a machinery. If it fails to repay in two years, just because the repayment has been stretched beyond its original schedule, we should not consider it as an NPA. Nowhere in the world such a yardstick is applied. We need to see if the machinery equipment is sound and capable of generating good output.” The bank chief made these comments to reporters on the sidelines of a banking seminar organised by the Federation of Indian Chambers of Commerce and Industry.
The country’s largest commercial bank saw a surge in bad loans in the first three months of this financial year. The bank added close to Rs 7,500 crore of bad loans on a gross basis during the quarter, prompting investors to sell its shares. Its gross NPA ratio was at 4.99 per cent, while net NPA ratio was at 2.22 per cent at the end of June 2012.
Chaudhuri also said concerns over SBI’s credit quality was “largely overplayed” and the bank will see an improvement in the health of its assets from the July-September quarter. “Our quarterly profit was more than most public sector enterprises’ but our stock got a huge battering because of our NPA. We have done an analysis of the situation. NPAs are largely in the mid-corporate and SME sectors. But with a little consideration, a little understanding and stretching the repayment period, most of these accounts can be upgraded,” Chaudhuri said.
The chairman of the banking behemoth said there would soon be an improvement in the NPA numbers. “We accept the reality, but still, I think, NPA concerns are largely overplayed. In the next two to three quarters, our NPA management will be much better. Current trends do not indicate any increase in our NPAs. In fact, there could be a contraction in our NPAs in this quarter,” he added.
The bank has asked some of its borrowers to sell non-core assets to improve cash flow. If a company is short of capital, SBI is ensuring that the firm takes steps to strengthen its capital base. “If the company is asset-rich but cash-poor, we are positioning more loans to them,” said Chaudhuri. SBI has also appointed 20 senior executives from various public sector enterprises to review the technical aspects of industrial projects before sanctioning fresh loans against them.

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