State Bank of India announced its fourth quarter numbers today, where the asset quality worry continue to haunt India's largest bank as it posted 140 basis point rise in gross non-performing assets (NPAs).
Arundhati Bhattacharya, Chairman of SBI said that the bank is certain of recovery going forward as business confidence has been upbeat lately.
Speaking To CNBC-TV18’s Ritu Singh, Bhattacharya said that there are many accounts that have slipped are working assets, so resolution is important and the asset quality pressure will depend on economic performance going forward.
Infrastructure and affordable housing will continue to see credit demand and a credit growth of 13-14 percent can be expected in FY17, she said.
Speaking on SBI’s merger with its associate banks, she sees the formalities taken care of in the next 6-12 months.
She opines that credit growth will follow only after economic growth happens. Below is the verbatim transcript of Arundhati Bhattacharya's interview with Ritu Singh on CNBC-TV18. Q: What are you doing to address the asset quality issue? A: See quite certain recoveries will be there. At the end of the day after having created non-performing asset (NPAs) to the extent of Rs 98,000 crore, obviously if there are no recoveries it would be a very sad thing, not only that you must understand many of these accounts that have been slipped in the last two quarters, these are working assets. They are not closed factories. They are not roads to nowhere. They are actually working assets and there are people who are employed in those units and to that extent it is important that there should be some resolution, because we obviously don’t want productive assets to be wasted in a resource starved country like India. Yes, we are looking forward to resolutions. Regarding pressures and how it will be going forward - - it will depend upon how the economy pans out. At any point of time it is very difficult to call this unless you are sure about how the economic performance is. There I would say that there seems to be a general feeling that business confidence is up. I was just telling you all jokingly that yesterday when I met with many of our customers from the circle, we found that they seem to be more confident about their prospects in the future. Therefore to that extent I would say that we do believe that things will turn out better, but I still do believe that probably we will have to see growth coming first and that credit growth will follow only thereafter. Q: But of Rs 31,000 crore watch list you have declared, how much of a risk do you see if these spilling over as NPAs could that cloud the outlook perhaps and perhaps which sectors specifically you are seeing the most stress? A: No, I don’t think there is any question of clouding any outlooks. These are accounts which are weak. These are accounts that are under special monitoring. We conservatively can say that may be 70 percent of these will also go, so you sort of price it in and then you proceed with whatever you are doing and even there we have about Rs 3,300 crore of provisions, floating provisions that we have made for all of these accounts, not individually but they are floating provisions and they are outside of our PCR. Also we have another Rs 1,100 crore of countercyclical provisions which we have not received any permission from RBI to use. There are provisions for in respect of these accounts also in case they do slip. Q: Talking of provisions, RBI also asked all banks to start providing for restructured accounts 15 percent by March 2017, 2.5 each quarter. How much more provisions will you have to take for that and how much excess provisions are you already carrying. You mentioned some amount? A: Actually speaking how much I would be required to take for the restructured accounts itself, I don’t have the numbers now. We could provide it to you subsequently, but we have factored all of these in, going forward we have factored all of these in and therefore we are not saying that in 2017 things are going to be really very rosy because there are lot of challenges as I said the biggest challenge will be to start on the resolution process, that must happen very quickly now. Q: On the sectors where you are seeing stressed coming down and how are you calibrating your approach towards large corporate now that you have seen so much stress in them. Could you answer that? A: Calibrating our approach to large corporate we are very careful about which projects we support. We are also careful about ensuring that we give credit further our credit lines only to those corporate that are well rated, that is something we are continuing to do and whether some sector is stressed or not at the end of the day risk is micro not macro, but overall of course sector wise we have certain limits and in respect of the stressed sectors we are not increasing our exposures.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
