Don't see much impact of Banking bill on us: SBI

Diwakar Gupta, MD & CFO, State Bank of India doesn’t expect the Banking Amendment bill to have much impact on the bank if it goes through in the Parliament. 

The Banking Laws (Amendment) Bill seeks to amend three Acts -- the Banking Regulation Act 1949, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980. The consequent changes in the comprehensive amendment Bill will pave way for corporates to set up banks in the country. The Banking Laws (Amendment) Bill 2011 had proposed providing voting rights to investors commensurate with their shareholding in the private sector banks. At present, the voting right is capped at 10 per cent. “It won’t affect us in terms of voting rights because we already have the 10 percent cap,” he said in an interview to CNBC-TV18.  Also, it may not impact other PSUs also because government’s holding in most of them is higher that seventy percent and in a scenario voting is a non issue today, he added. However, going forward if the government looks to dilute its stake in these PSUs significantly then the value of this amendment will unlock, he added.    Below is the edited transcript of his interview with CNBC-TV18's Latha Ventakesh and Ekta Batra Q: PSU bank stocks have been running up on guesses that there is a turnaround in the economy and now that is a bit confirmed by IIP numbers- do you see fall in the non-performing loans (NPLs) this quarter or the next? A: Non-performing asset (NPA) numbers come with a lag, so it is hard to say in one month or three month that numbers make a difference to the NPA number. Therefore, I have maintained all along that slicing data into very small slices does not really give us a trend. So we have already seen the debate around the IIP numbers that there could be a base effect and so and so forth. But it is a great thing that we have positive news. It is too early to draw a conclusion from that. Our NPA numbers are not any worse but to say that they are better wills still take some time. Q: If we assume that the growth which we saw in October is sustained even at that pace, by when will you start seeing NPAs lowering? Will it take two quarters? A: Yes. I would think that the numbers on the NPA would really reflect the trend very clearly only by Q2 of next year. Q: I wanted to focus on one particular asset class which has plagued a lot of non-performing loans (NPLs) for a lot of banks which is basically State Electricity Boards (SEBs). There was a plan to restructure the SEBs with the banks as well as the state governments, which has actually mooted earlier this year, any progress at all on that? Has any meeting taken place? A: No. I think execution is yet to happen. It takes a little time because there are three stakeholders and there are so many states. There are 15 or 18 stakeholders. I don't think much has happened in terms of concrete implementation but the steps are being taken to get to that. So, that is a positive thing. Q: A lot of interactions in the past with State Bank of India (SBI) have mentioned that, you don’t have many SEB loans but more power generator loans, now that the fuel supply agreements (FSA) are just about plodding and many plants will possibly be reaching commencement date soon – do you think that possibly will be the next source of an NPL or asset quality problem? A: I should have cleared upfront on your earlier question that, State Bank really has very limited exposure. We have totally about Rs 45,000 crore to power, as a sector and Rs 8,000 crore to SEBs and all the SEB exposure is standard. Having said that, there is about 50,000 megawatts of capacity coming up at different stages, all the way up to 2015 and that means a capital outlay of Rs 250,000 crore and maybe bank financing about Rs 100,000- Rs 175,000 crore. We have enough time for the issues around, coal and fuel supply to iron out. Personally, given the statements by the government and the fact that power is needed so desperately and it is completely an inelastic commodity; we in the bank are quite sanguine that a satisfactory resolution to the current issues will be found and projects will not really languish after coming to the stage when they can begin to produce power. _PAGEBREAK_ Q: The Banking Laws (Amendment) Bill - does it make any difference to you at all? A: The Banking Laws (Amendment) Bill to State Bank almost certainly will not make any difference in terms of voting rights because we already have the 10 percent cap but even for the other public sector banks. Given the fact that government holding today is 80 percent, 70 percent in some cases, even higher, voting is really a non issue today. What it does signifies that going forward, if and when, the government dilutes significantly then certainly the value of this particular amendment on voting will be unlocked. There are other procedural things around making mergers easier, so and so forth, which is all in the right direction. Q: Exactly, that is why a lot of the SBI baby stocks were also raising. Should we expect hastening of the process of merger between SBI and its subsidiaries? A: The end state has to be that they have to merge. But on the issue of timing, I don’t think there is a definite road map. It would be fair to say that we should not expect a merger during this fiscal. Q: What is the latest on Kingfisher and the restructuring? Now that it is getting louder that the promoter is possibly going to strike a deal by mid-December – is it any sort of relief for you as well? A: I had recently used the phrase 'work in progress'. We don’t really get to know on a day-to-day basis where we are. The consortium is of course involved in it and our mid-corporate group is very-very intensively involved. Other than that, on a day-to-day basis, it is very hard to say whether, today we are better off expecting equity or infusion. I can only surmise that the promoters also would be equally keen to see a resolution and they are trying their best, both to get a partner as well as to see what can be infused. The whole question will lie around viability. Q: Has the promoter actually shared anything with you with regards to a possible strategic partner – i.e Etihad? A: No. I don’t think we have any clarity. Personally, at least I am not aware of any further specific development. But again roping in of a new investor itself is an issue of viability.