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7 April 2017
State
Bank of India's bad loans have ballooned approximately 50 per cent in the span
of a year and those of its five associate banks by 170 per cent.
The
bank will likely have to increase its provisioning for bad loans -- setting
aside money to partly cover the non-performing assets (NPAs) following its
merger with five subsidiaries.
SBI,
which had a provisioning coverage ratio of about 59 per cent, said that after
the merger it will revisit the NPAs and provide accordingly.
"Depending
on the age of NPAs, we provide provisioning as per the norms. Hundred per cent
provisioning is not a practice in the industry," SBI Managing Director
Dinesh Kumar Khara told. The Total Investment
& Insurance Solutions
SBI's
gross NPAs in December 2016 were at Rs 1.08 lakh crore, an increase by 48.6 per
cent from Rs 72,792 crore in the third quarter FY16. The bank's net NPAs rose
by 52.6 per cent during the same period. The
Total Investment & Insurance Solutions
SBI's
five associate banks reported a 172.8 per cent increase in gross NPAs at Rs
55,164 crore in December 2016, as compared to Rs 20,218 in the same period in
2015-16. The net NPAs of these rose by 218.7 per cent in the same period.
The
five associate banks with which SBI merged on April 1 were: SBBJ (State Bank of
Bikaner and Jaipur), SBM (State Bank of Mysore), SBT (State Bank of
Travancore), SBP (State Bank of Patiala), and SBH (State Bank of Hyderabad).
The
Bharatiya Mahila Bank, which is not an SBI subsidiary, was also merged with it
on the same day. The Total Investment & Insurance
Solutions
The
combined gross NPAs of SBI and its five associate banks as on December 31,
2016, stood at Rs 1.6 lakh crore or 8.70 per cent of the total assets, while
the net NPAs were at 5.33 per cent.
"As
far as the corporate books of associate banks are concerned, we started
converging the NPA books of corporates from September quarter; so I don't
envisage any surprises on that," Khara said. The Total Investment & Insurance Solutions
The
Reserve Bank of India had asked the banks to clean up their balance sheets and
had given a deadline of March 31 for asset quality review. Kumar said that SBI
has been continuously declaring NPAs; so there will not be any extraordinary
rise in the fourth quarter of 2016-17.
SBI
Managing Director Rajnish Kumar told IANS, "We have been declaring NPAs
from time to time. I don't expect any extraordinary hike in NPAs. The formation
of NPAs has slowed, that is the fact, though we are still not out of the woods
as of now."
From
time to time there are meetings at the level of the government or Indian Banks'
Association to find an acceptable solution as the recognition of NPAs has
happened in the last two years, Kumar said. The Total Investment & Insurance Solutions
"All
have realised the problem and are trying to work together to find a solution
that is acceptable to all. NPA problem is (because of) corporates, or rather
mid-corporates," he added.
He
said that the NPAs would get reduced if the economy grows at a fast pace and
profitability of stressed sectors sees an improvement. The Total Investment & Insurance Solutions
"For
resolution of NPAs, the profitability of corporates should increase. For
example, the steel sector has now suddenly started showing up, because there is
an improvement in the profit margins. It is because of the pressure on the
margins that the debt becomes non-sustainable. But if EBIDTA (earnings before
interest, depreciation, taxes and amortisation) margins improve, synergy
improves, problem would at least be partly solved," Kumar said.
Khara,
however, said that the idea of bad bank could be considered, not as a
repository of bad assets, but with the aim to turnaround these assets.
"There
are some insolvency professionals coming in. But by the time the ecosystem gets
created and starts delivering... it is still some time away. That kind of
vehicle to identify such assets which can be turned around is needed," he
said.
SBI
has committees for NPAs depending on the size of the loans. There is also a
committee under the bank chairperson which looks after stressed assets worth Rs
500 crore or more. Similarly, there are committees that regularly review NPAs
and decide on the future course of action. The
Total Investment & Insurance Solutions
After
the merger, SBI, with a customer base of 450 million, has about a quarter of
all outstanding loans of the banking sector.The Total Investment & Insurance Solutions
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