Likely to see 70-75% slippage in Rs 31k cr watchlist: SBI

State Bank of India’s guidance on potential slippages of Rs 40,000 crore or 2.7 percent takes into account loans other than those to large and mid-sized corporate accounted for in the stated watchlist of Rs 31,000 crore, clarifies B Sriram, MD & Group Executive-National Banking, on the confusion between the two numbers given out by the bank in a conference call post its quarter earnings announcement.  

In an interview to CNBC-TV18, Sriram says 70-75 percent of the watchlist amount could become non-performing assets (NPAs).

The bank has exposure of over Rs 1.36 lakh crore to the power sector with nearly Rs 60,000-70,000 crore to good companies, he says. Non-performing loans from the sector would be only 2 percent of total exposure.

Sriram adds that the bank currently has provision coverage ratio around 62 percent and will work towards bringing it closer to the Reserve Bank norm of 70 percent by end of FY17.Below is the verbatim transcript of B Sriram's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: Your watch list was Rs 30,000 crore or Rs 31,000 crore but you are guiding for a potential slippage of Rs 40,000 crore for FY17. There seems to be discrepancy there. You haven’t included all your doubtful guys in that 30,000 list?A: The Rs 30,000-31,000 crore was a watchlist on the large and mid-corporate for which we did a detailed accountwise analysis. While the Rs 40,000 crore or 2.7 percent slippage ratio that we have guided also takes into account the other sectors. Typically there are certain volatility in the other sectors in terms of quarters especially we find that agriculture for instance slips more in Q1 rather than in Q4. So, if you start to add up all these, I think there is a fair chance that we should be within that 2.7 percent of slippage guidance that we have given.Sonia: Can you give us a little more granular data on which sectors are seen lower amount of stress, I was reading a report which suggested that from this watchlist, it is indicative that the power book has seen lower amount of stress in the quarter gone by. Can you give us more details on that?A: In the watchlist, the power sector is the one that is the highest in terms of out of Rs 31,000 crore, we have given a guidance of about Rs 4,800 crore on the power. I think the issue there is that in terms of the exposure that we have to pass is the guidance little bit low, that is the question that has been asked.If you see our power sector, we have an exposure of about Rs 136,000 crore of which almost 50 percent of it -- Rs 68,000-70,000 crore -- are to high rated power companies and a few well performing distribution companies (DISCOMs). Rs 25,000 crore is the cost of companies of corporate groups where we don’t expect stress and about Rs 12,000 crore are to small power exposures of around 100 power exposure which are between Rs 50 crore and Rs 150-200 crore.So balance Rs 30,000 crore is there which is in the development state of which we have already given a guidance of about Rs 12,000 crore for which already non-performing assets (NPAs) or for which we have already taken in our watchlist.That is a fair assessment that we have done and one of the things that has happened is also that if you see our power sector non-performing loans (NPLs) as on date, even after the asset quality review (AQR) is just about 2 percent of our total exposure.Latha: You have guided for credit costs of between 1.7 percent and 1.8 percent. Separately Mr Mundra has been saying that the Reserve Bank wants provision coverage ratio (PCR) to get to 70 percent in the current year. You are sitting at 43 percent. Is 70 percent factored in when you give a credit cost of 1.7-1.8?A: We are not at 43 percent. The PCR is calculated after factoring the collection which is about 60.5-61 percent that we have today. If you see, last year also we were between 60-70 percent during the year and we are quite hopeful that we should be able to do towards 70 percent mark as the quarter\\'s results come in.Latha: So your 1.7-1.8 factors in that 70 percent mark?A: We have not guided for 70 percent but what I am trying to say is that it is trending towards the upper side of the band between 60 and 70. As far as for us anything above 60 percent is a fair PCR and as we go ahead, we will try and see as to how much more we can add to it.Sonia: When you give us your FY17 slippage ratio guidance at Rs 40,000 crore, you indicated that it will be at about 2.8 percent but can you break that up for us quarter wise, what could the slippages be in Q1 and Q2 and as a percentage of the book, how much could it be?A: I don’t think we can do that. As I said, there are volatilities in certain segments. So I think we need to wait and watch but as far as the mid and large corporates go, we have guided about Rs 31,000 crore of which about 70-75 percent conservatively will slip but what quarter and how, it is too early to call.