The country’s largest lender, State Bank of India has called for an independent agency and transparent process to help banks offload bad loans at a practical price.In an exclusive interaction with Moneycontrol, SBI Chairman Arundhati Bhattacharya said resolution of non-performing assets (NPAs) and the merger of five associate banks with itself are the key near-term challenges for the bank.
On non-performing assets, she said, “The main thing is that when we are looking at a very sustainable solution, we need to ensure that the pricing at which we put the new piece is sustainable. So, to that extent, there will be quite a lot of write-downs both on the equity and the debt front.”
State-owned banks in general have been grappling with a pile of bad loans, and many solutions have been proposed to help the banks get the dud assets off their books. But the price at which the assets should be,a nd more importantly, can be offloaded, has proved to be a tricky issue.
According to Bhattacharya, one of the key challenges was that the write downs - the depreciation in value of the asset - had to be done in a way which gave comfort that it was done for the right reasons and up to the right amount so as to not undervalue or overvalue the asset.
“This is very difficult to determine. Therefore, it is good to have a transparent process to run and then get some comfort from another agency that what you are doing is the best under the circumstances…If those sort of arrangements are made with little more relaxation given to the agencies who will be working on these things to come up with the right kind of solutions, I think it is possible that we can do it,” she said.
Even as the pace of growth in bad loans for SBI slowed marginally, its gross bad loans are still at over Rs 1.08 lakh crore, which is 7.23 percent of its total loans. Bhattacharya feels that though demand exists in the rural economy, further accretion of bad loans would depend on how the economy fares.
Even though she agrees in principle with RBI Deputy Governor Viral Acharya’s suggestions to set up a private and quasi-government bad bank, this could take a long time while resolving bad loan issue needs to be quick in-house resolutions by banks and give it to the private firms to turn the assets healthy.
SBI, which is in the process of merging five of its subsidiary banks from April 1, will have to spend a lot of energy and time in fixing its administrative setups, rationalising all its branches, merging the six treasuries and IT into one, relocating the roles of its employees and still providing a seamless experience for its customers.
She denied that bank would be doing rationalising of employees but said that the incoming staff of about 70,000 from the associates would require adequate training.Optimistic on the digital push, Bhattacharya highlighted
Optimistic on the digital push, Bhattacharya highlighted that simple and convenient offerings like Bharat QR and mobile apps like UPI and BHIM will attract more people into making cashless transactions.
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