New RBI capital norms may push up CAR by 1%: SBI CFO

The Reserve Bank of India on Tuesday amended some treatments for certain items in balance sheets of banks with the idea of boosting their regulatory capital and aligning it with the internationally adopted Basel III capital standards.As per the amendments, the banks will be allowed to recognise part of their real estate assets, foreign currency assets and deferred tax assets as capital with suitable hair cuts. Speaking to CNBC-TV18, Anshula Kant, CFO of State Bank of India (SBI) says that the bank will have to reevaluate its real estate assets as per the new guidelines. The bank has substantial amount of foreign currency translation, Kant says, adding that “the bank should get upward of 100 basis points (bps) of capital [adequacy ratio]" resulting from the move.Kant expects the non-performing loans (NPL) situation to be much better in FY17 than the current year.Below is the verbatim transcript of Anshula Kant's interview with Latha Venkatesh on CNBC-TV18.Q: You must have done the calculations overnight, how much of extra capital are you getting because of the change in basel rules?A: There is a figure already. We have shared with the market that we had done the evaluation of a real estate assets in the context of floating our real estate subsidy, which we had floated last year for managing the real estate assets. That is a four-year old valuation that figure comes to about Rs 23,000 crore. However, we have to now, as per the RBI guidelines that have come, we get them valued again by two valuers and we will see because it has to be clear sellable properties. So I have to get that checked out.Q: But 45 percent of that will be available?A: Yes and there will be some book value to this also. So a small book value to Rs 23,000 crore, the net difference would be then 45 percent.Q: That sounds a whole lot, isn’t it?A: It is. Rs 23,000 crore I am saying with a caveat, we got it done four years back, we will have to get it done again, some of them here or there maybe litigated, we will have to check out.Q: Besides this, you have foreign currency?We have a substantial amount of foreign currency translation that we will get on our overseas book.Q: In your results you had about Rs 28,600 crore of reserves, so you mean the reserve is about Rs 38,000 now?A: No, it will not work out like that. Our accounts people have said that it will be a much smaller figure than that not in that figure.Q: Can you give me an idea of how much of your reserves will go up by?A: I don’t want to come out with the numbers because we have not done the detailed number crunching on it. Let me say between all of this we should get upwards of 100 bps as and when we do it.My estimate is it will be more than 100 bps but again it will take us time to get those real estate values properly as per the RBI guidelines.Q: You also have some space released in your tier-II so that also will come your way, you can raise, so overall capital adequacy can be increased even more?A: Last quarter we raised about Rs 4,000 crore and this quarter we have already raised Rs 3,000 crore and we are in the process of raising another Rs 3,000 crore. So between December and March we would have raised about Rs 10,000 crore of tier-II anyway.Q: The revalued reserves come to you free, it is a capital you don’t have to pay dividend on, it is not perpetual bonds, you don’t have to pay interest so that capital is coming to you free?A: You could look at it like that how I look at it -- we have huge strength in our balance sheet that we have these kind of assets sitting with us. We have not encashed them. Earlier also you could have revalued your fixed assets and taken it to tier-II but we have held on and not done that so we will see how we gradually take the upside of this.Q: It is not everyday in your 70 year history that you have bad loans of 7-8 percent. This is one of I would assume but we hear about some solutions coming to ABG Shipyard, we also hear about other strategic debt restructuring (SDR) cases probably getting up buyer maybe Electrosteel Steel, can you tell us whether the NPL positions generally and the SDR position is better off than it was in Q3?A: It is hard to say unless this deal crystalise and go to the last mile and the dotted line. The negotiations on many of these things have been going on for sometime. We are hopeful that even if they don’t look great in this quarter, as compared to Q3, we maybe around the same point but going forward, in the next year, we should certainly get some upside from these assets.Q: Your guidance during the results was that in Q3 whatever you created by way of NPLs would be the same that you would create in Q4 that you are equally dividing the stress, that guidance stand?A: Broadly we had done that.Q: So would your guidance be that for FY17, the pace of increase in NPLs would reduce sharply most of it is already recognised?A: As of now, I would imagine so and our expectation is that it should come off. How sharply it will come off, we will see.Q: Therefore what kind of a risk weight coverage and provision coverage you would have by the end of the year, would it be 50 percent, would it be 55 percent?A: We are at about 65 percent and we would be about the same level. I don’t think it will go up significantly but we should be about the same level or a little lower.Q: Are you therefore enthused to go ahead with your qualified institutional placement (QIP) or any other market raisings, now that you have this buffer and that would improve your share price?A: We will see how the markets look but the fact is that our tier-I is already at 9.64 which is way above what is required by the basel-III guidelines and RBI guidelines. We already have sufficient flexibilities with us to time the market right. We are not in a hurry because current valuations will mean dilution for our existing shareholders. So we are not in a hurry.Q: The other Rs 5,000 crore which the government hasn’t yet disbursed for the current year, the Budgeted amount was Rs 20,000 crore and then they said they will give another Rs 5,000 crire so any chat with the ministry that you will get it before the year runs out?A: I think now the government will also have a lot more flexibility in terms of whom they give it to given that this guidance has come from RBI.Q: You are not in queue?A: We are not in queue but if they do give us, we will be happy.