Saikat Das
moneycontrol.com
India's banking behemoth - the State Bank of India (SBI) is no exception when it comes to the credit quality jolts that banks received in the last one year. It is the mid size companies, which defaulted the most leaving bankers dumbfounded over rising pile of bad loans.
According to Shyamal Acharya, deputy managing director (mid-corporate group),
SBI, this scenario however, does not throw a spanner in extending loans to mid size companies.
"Business is a perishable commodity. If you don't capture a business opportunity today, you will not get it tomorrow. We will carefully expand loans to mid size companies, but not slowly," he told
moneycontrol.com in an exclusive interview.
SBI is planning to grow its mid corporate loans by 20% in 2013 provided the economy turns conducive while it is eying to bring down its gross non-performing asset ratio from 7% to 5% by March, 2013.
Here is an edited excerpt of the interview: Q. SBI is focusing on retail. Will it lead to any contraction in mid corporate credit portfolio? A. The focus of the bank is definitely on retail. But that does not mean that it will not grow on corporate side. The focus is comparatively more on retail. When there is a slowdown in economy, then the scope of expanding corporate loans becomes less. Risk (for credit) is relatively more on companies.
Also read: SBI sees spurt in Dec home loan growth, mulls base rate cutQ. How do you plan to grow corporate loans? A. We will expand loans to mid size companies (with turnover of Rs 50 - 500 crore) carefully, but not slowly. There is no prevailing fear that we won't grow. Business is a perishable commodity. If you don’t capture a business opportunity today, you will not get it tomorrow. We have to be careful about underwriting standards.
We have 60 mid corporate branches across the length and breath of the country. We do not have any active plan to increase the number.
Credit portfolio size for mid corporates stood at round Rs 1.75 lakh crore as on Nov 30, 2012. We would like to make it Rs 2 lakh crore by March, 31; 2013. In FY12, it was at Rs 1.70 crore. In 2013, we should look for around 20% growth in our mid corporate portfolio presuming that economy should grow. It all depends on how economy pans out.
Q. Do you see any improvement in mid corporate business? A. Frankly, I do not see any perceptible palpable improvement. What problem you see is connected to the economy. If economy improves, things will come back. Problems are connected to the slowdown in economy. While there is no much of improvement, there is also not much of deterioration too.
I would not be very optimistic. However, I will not use the cliche that the worst is over. We have identified and captured most of the accounts where there are problems and tried to take them to a certain process.
Q. Will the government reform measures help ease pain for companies?A. There is a lag effect for all these measures. Government announcements are primarily made for big corporates. Firstly it will impact on large corporates and then, there is a trickle down effect. If those measures lead to an improvement in economy, mid corporates will benefit out of it. It is slightly difficult to directly connect it.
Q. In which sectors do you face most of the asset quality issues?A. Textile is the sector where non-performing assets are high. So is the Iron and steel sector. However, this does not mean that we put down them on a black list. We always take a case by case view on each sector.
We don't have any particular bias. It depends on all individual proposals. If the proposal is good in terms of financials, in terms of the industry (wherein the borrower is currently operating), and credit rating, then we take a favourable view.
Q. What is the rate of delinquency in mid corporate loans?A. As on November 30, gross NPA ratio is around 7% as against 3.5% recorded in FY12. We would like to reach 5% by March 31, 2013. We are also focusing on big ticket good business.
Besides, many of the loan accounts, which went to the corporate debt restructuring cell may come back to standard status. If you refer a case to CDR before it slips into non-performing status and its CDR package is finalized, it gets back its status to standard asset. There would be some sort of improvement though that route. We are not expecting any nasty surprise.
Q. Does SBI's Kingfisher exposure (at around Rs 1,500 crore) require any further provisioning? A. For SBI, the standard of KFA asset has been doubtful since last one year. From provision standpoint, there is no issue. We have provided as per RBI rules of provisions.
We had marked it as sub-standard last September 2011. When the original restructuring failed, we pre-dated the slippage as per RBI guidelines. Accordingly, there is a time factor and it becomes doubtful.
Q. What lessons have you learnt for the economic downturn? A. Two lessons broadly! One, underwriting standard should be very good and two, post sanction actions should be very strong in terms of follow-up and monitoring of the advances.
For example, when you appraise the credit proposal, the quality of appraisal should be very good in terms of the knowledge of industry, company and track record of the promoter. Once, you sanction the loan the relationship manager should be regularly in touch with the company to keep abreast with the current condition. If something happens, it can be fixed immediately.
Q. Are you bringing any change in mid corporate credit structure? A. Actually, we have taken a slew of measures to improve our credit skills. It ranges from reducing the work burden on a single individual to rigorous training programmes. The most important is that we have replaced the old system of account management team (ATM) with the creation of credit processing cell council (CPC).
Also read: SBI modifies mid corporate credit structure, eyes 5% NPAMoreover, we have appointed one additional general manager each in charge of four big mid corporate regional office (MCRO) centres. Similarly, we have also created two posts for chief general managers at head office.
saikat.das@network18online.com 
