No pressure from government to cut rates: Pratip Chaudhuri

Mumbai, September 7: In an interview with ET Now, Pratip Chaudhuri, chairman, SBI, talks about the rationale behind their decision to cut rates as well as credit growth targets and the expected NPA levels in Q2. Edited excerpts:
ET Now: Take us through the rationale behind your decision to cut deposit rate.
Pratip Chaudhuri: Yes. Our deposit growth has been very robust from April 1 to August 31. The deposits have grown by Rs 75,000 crore and the loan growth, including commercial paper, has been only Rs 30,000 crore. Therefore, we thought we will try to restrict and moderate our deposit growth.
ET Now: Are PSU banks cutting rates under pressure from the government even though SBI has been the first to do so?
Pratip Chaudhuri: We don't cut rates because of pressure from the government. PSU banks decide their rates on their own. But while deciding the rate, one has to look at the market and the relative positioning of the bank. We adjust the rate looking at the demand. For example, in our case, we reduced the car and home loan rates thinking that the reduction would allow growth in the loan book for cars and homes.
ET Now: But many banks have revised their credit growth targets in light of low demand. Is there is a similar thought at SBI as well?
Pratip Chaudhuri: These targets are not our own. The targets are largely determined and shaped by the volumes you see. It is very easy to move the credit growth target up, but where are the deposits? Similarly, if you get more deposits and there is not enough traction in the credit market, then you have to calibrate it down. Therefore, it is always a function of demand and supply. And I do not think the individual target-settings by banks are anyway meaningful.
ET Now: What kind of loan growth are you seeing and sectors will drive this demand?
Pratip Chaudhuri: For our bank, the biggest contributor has been the construction sector, particularly the contracting firms and companies which are doing work for state government agencies. Next are the electrical machinery and the power sector which are selling their produce to the distribution companies. These have been the two biggest sectors.
There was some worry on the iron and steel front because there were problems as far as iron ore mining and availability of iron ore is concerned. The iron ore mining situation is becoming slightly better. Therefore, we expect the steel sector's raw material availability to rise and their finances to improve as well.
ET Now: Tell us about your asset quality, especially in terms of the power, iron and steel sectors. Which sectors are likely to be the biggest contributors to your NPA situation?
Pratip Chaudhuri: The levels can be known with some degree of accuracy only by the 20th or 25th of the month following the quarter, but we are working hard to control these levels.
ET Now: What kind of NPA levels are you expecting in Q2?
Pratip Chaudhuri: Restructuring pipeline is not very different from the delinquent pipeline. Therefore, for companies that are under stress but have real value asset and want to borrow against that, we are considering extending the tenure of the loans or making available more loans.
ET Now: What is the extent of restructuring that you are expecting in the second quarter? Tell us what the pipeline is looking like.
Pratip Chaudhuri: Under the SBI Act, the minimum government holding has to be 51%. Therefore, I do not think it is right for me to comment because the government's holding percentage has to be determined by the government. I can only tell you that the government has left no stone unturned in capitalising the public sector banks. Last year, they pumped in about Rs 15,000 to 20,000 crore of equity to keep the pubic sector banks well capitalised.
Therefore, I do not think anybody should doubt the commitment and ability of the government to keep the banks well capitalised. But at the same time it is important that the banks generate sufficiently large internal surpluses.

SBI Gujarat circle records lowest NPAs

While being on the forefront of the industrial development, Gujarat-based borrowers have set a unique example of maintaining strict discipline as far as loan repayments are concerned. As per the senior officials of the country's largest lender, State Bank of India (SBI), Gujarat has lowest rate of non-performing assets (NPAs) for the bank as compared to other states in the country.
"Our Ahmedabad circle has lowest NPAs in the country in terms of units as well as in terms of percentage to the total advances. While bank's overall gross NPAs stand at around 4.9 per cent, that of Gujarat circle hovers around 1.2 per cent. This is mainly due to healthy industries in the state," said A Krishna Kumar, MD & group executive (national banking), State Bank of India (SBI).
Kumar, who was on a visit to the city on Wednesday, informed that over the years Gujarat-based borrowers have shown strict discipline of repayment of loans. "It is not that other states are not doing it, but comparatively Gujarat has performed well in terms of keeping the NPAs low," he added.
SBI's Ahmedabad circle includes Gujarat state and union territories of Diu, Daman and Dadra Nagar Haveli and has larger exposures to sectors like retail, agriculture and mid-cap companies. "Industries are comparatively healthy in Gujarat. Generally, they maintain loan repayment schedules. Therefore our gross NPAs stay low," informed Ramesh Rangan, chief general manager (CGM), SBI - Ahmedabad circle. As on July, 31, 2012, Ahmedabad circle reported total deposits of Rs 73,254 crore and advances of Rs 29,569 crore. The circle has over 1500 ATMs with branch network of 1230 across the state.
Nationally, for the first quarter ended June 30, 2012, SBI's standalone net profit stood at Rs 3,752 crore as against Rs 1,584 crore in the same period last year. Bank's total advances grew by 18.9 per cent to Rs 916,841 crore from Rs 770,891 crore in the corresponding period last year.
While, total deposits for the bank stood at Rs 1,102,926 crore as on June 30, 2012, up from Rs 950,072 crore, showing a growth of 16.1 per cent. Gross NPAs for the period stood at around 5 per cent.

Rs 4,000-cr capital infusion on cards: SBI chief

State Bank of India expects Rs 4,000 crore capital infusion from the Union Government this fiscal. The bank will be discussing the matter with the Government this week, said Pratip Chaudhuri, Chairman, SBI.
The bank had earlier this year received close to Rs 8,000 crore from the Government.
“They (the Government) have called us for a meeting which should happen this week, and possibly another Rs 4,000 crore looks to be on the horizon,” he said.
As on June 30, 2012, the bank’s capital adequacy ratio stood at 13.17 per cent.
Non-performing assets
According to Chaudhuri, NPA (non-performing asset) concerns were slightly overplayed. “We should not see ghosts in NPAs,” he said, and added SBI has already taken several measures to bring down its NPAs.
“We are asking companies having non-core assets to sell them and bring the cash. If the company is short of capital, we are asking them to get some private equity or get equity investors, and if the company is asset free and cash poor, we are positioning more loans,” he said.
Recently, SBI appointed 20 credit appraisal experts from leading public sector companies to deal with the technical aspects of its new projects.

SBI chief wants NPA rules tweaked

Kolkata, August 23: State Bank of India (SBI) chairman has called for a change in non-performing assets’ (NPAs) norms. “There is a need to change the norms relating to NPAs. We should not see a ghost in everything,” said Pratip Chaudhuri.
“For instance, a company has taken a two-year loan to install a machinery. If it fails to repay in two years, just because the repayment has been stretched beyond its original schedule, we should not consider it as an NPA. Nowhere in the world such a yardstick is applied. We need to see if the machinery equipment is sound and capable of generating good output.” The bank chief made these comments to reporters on the sidelines of a banking seminar organised by the Federation of Indian Chambers of Commerce and Industry.
The country’s largest commercial bank saw a surge in bad loans in the first three months of this financial year. The bank added close to Rs 7,500 crore of bad loans on a gross basis during the quarter, prompting investors to sell its shares. Its gross NPA ratio was at 4.99 per cent, while net NPA ratio was at 2.22 per cent at the end of June 2012.
Chaudhuri also said concerns over SBI’s credit quality was “largely overplayed” and the bank will see an improvement in the health of its assets from the July-September quarter. “Our quarterly profit was more than most public sector enterprises’ but our stock got a huge battering because of our NPA. We have done an analysis of the situation. NPAs are largely in the mid-corporate and SME sectors. But with a little consideration, a little understanding and stretching the repayment period, most of these accounts can be upgraded,” Chaudhuri said.
The chairman of the banking behemoth said there would soon be an improvement in the NPA numbers. “We accept the reality, but still, I think, NPA concerns are largely overplayed. In the next two to three quarters, our NPA management will be much better. Current trends do not indicate any increase in our NPAs. In fact, there could be a contraction in our NPAs in this quarter,” he added.
The bank has asked some of its borrowers to sell non-core assets to improve cash flow. If a company is short of capital, SBI is ensuring that the firm takes steps to strengthen its capital base. “If the company is asset-rich but cash-poor, we are positioning more loans to them,” said Chaudhuri. SBI has also appointed 20 senior executives from various public sector enterprises to review the technical aspects of industrial projects before sanctioning fresh loans against them.

State Bank of India maintains margin guidance of 3.75%

Mumbai, August 13: In an interview to CNBC-TV18, Pratip Chaudhuri,  Chairman of State Bank of India says, 9% of total midcap book of Rs 1.75 lakh crore is NPA. The bank maintains its margin guidance of 3.75%. State Bank of India‘s first quarter results disappointed the street. While net profit jumped 136% year-on-year to Rs 3,752 crore, investors were unnerved by the steep rise in non-performing assets. The bank’s net interest income for the quarter rose 14.6% to Rs 11,119 crore, as a 23% rise in borrowing costs ate into the profit margins. The bank’s operating income rose 10.5% year-on-year and operating profit, 13%.

The bank’s net NPA rose to 2.22% from 1.82% quarter-on-year. The bank maintains its margin guidance of 3.75% and Chaudhuri explains, “It’s a slightly fluctuating game, but I do not think there is still possibility of it dropping very substantially. It would not. This is the bottom and we maintain 3.75% guidance because what is core to our margin is our ability to procure savings bank account at an optimum price.” Going forward, he expects the credit growth to come mainly from the retail sector. Here is the edited transcript of the interview on CNBC-TV18.

SBI's sharp downturn NPAs increase, but provisioning does not

The performance of the State Bank of India (SBI), the country’s largest lender, is in a way similar to that of the Indian Railways. Both, because of their size and critical positioning, are significantly linked to the overall health of the economy. It is, therefore, not surprising that in the first quarter of the current year the bank has reported a sharp rise in non-performing assets (NPA), indicating borrowers’ inability to service their loans in the present economic environment. This has overshadowed the large year-on-year rise in the bottom line, which has, in any case, benefited from the earlier low base then caused by catching up in provisioning. The bank’s Chairman, Pratip Chaudhuri, has highlighted the deterioration in the portfolio for mid-corporates and small and medium enterprises, which underlines the adverse conditions at the grassroots level. The agricultural and large account portfolios have also deteriorated, but Mr Chaudhuri has held out the hope that with the monsoon picking up somewhat and a chance of two large loans getting back on track, the outlook may not be all that depressing.

What cannot, however, be explained by the overall deterioration in the economic situation, which has been gradual, is the sharp setback in performance compared to the picture it had projected just three months ago. In the last quarter of 2011-12, gross NPAs had actually fallen by a small amount, compared to the sequential previous quarter. This had been made possible by upgrading of assets, more cash recoveries and low additions to non-performing assets. The hope that the bank would be able to sustain this effort in order to combat the tough year that lay ahead has been belied. Gross NPAs have gone up by a massive nearly Rs 7,500 crore and taken the ratio of gross NPA to total assets up to 4.99 per cent from 4.44 per cent. There has also been a sequential deterioration in performance across the board covering interest income, net interest margin (down by 28 basis points), other income and operating profit. Poorer operating performance, combined with higher provisioning, has led to a fall in return on assets by 12 basis points to touch 1.03 per cent.

If non-performing assets have gone up sharply then so should provisioning. However, quite perplexingly, provisioning on that account has actually gone down marginally. This amounts to making the bottom line look better than it actually is. The bank may have good reason to believe that by the end of the financial year improvement will be made in asset quality, but it is always better to first provide and then write back if you get the chance to. After Mr Chaudhuri took over, he earned appreciation by cleaning up the balance sheet and then posting improved performance. That is the trend that needed to continue.

NPAs and bad loans have returned to haunt banks

Mumbai, August 11: India‘s biggest bank, SBI, announced quarterly results earlier this week and the share price tanked. While the bank announced a big jump in net profit, its non-performing assets also rose sharply, confirming that weak growth and slowdown in key sectors such as power and steel were continuing to hit banks.

The fortunes of banks are now more closely entwined with that of big business than before. Loans to top corporate groups account for a significant chunk of all debt. Weak growth, both in India and globally, means the bad loan problem, never far from the agenda, has returned to haunt India‘s banks. And predictably once again, the brunt will be borne by the public sector banks.

SBI‘s non-performing loans, which are a bellwether for the entire sector, were Rs 20,324 crore or 2.22% of total loans (after provisions) for the latest quarter. That might not seem much, but that number was 1.6% a year ago. Many analysts expect worse to come over the next few quarters as corporate India, hit hard by slowing domestic and global growth, feels the pinch.

Sector-specific problems such as the difficulties faced by power plants in gaining access to fuel will also play a significant role since a big chunk of non-performing assets are expected to come from infrastructure. The fortunes of India‘s banks are now more tightly entwined with that of a few big corporate groups which now make up a significant chunk of total loans.

Not all these loans have turned bad, but if slow growth and infrastructure problems remain, then expect a large chunk of these loans to weigh significantly on banks’ books.

ET presents data on the exposure of Indian banks to the biggest corporate groups, based on a report by investment bank Credit Suisse.

They now account for 13% of total loans, up from just 6% five years ago. Indian banks are now reliant for their financial health on a small group of top borrowers….

According to Credit Suisse, “all banks appear to have high exposure to the same select few groups”. Also, most of the investments by these groups are in the same set of sectors – especially power and metals.

These 10 groups account for 70% of private sector power capacity likely to come up by 2016-17.

State Bank of India: Net Profit Increased to Rs 3,752 crore

Mumbai, August 10: State Bank of India reported a 137 per cent jump in net profit in the April-June quarter despite continued challenge on the bad loans front. In the reporting quarter, India’s biggest bank clocked a net profit of Rs 3,752 crore compared with Rs 1583 crore in the year ago period.

Tight leash on operating expenses (up by 7.5 per cent at Rs 6,441 crore) and write-back in investment depreciation (Rs 521 crore, due to favourable interest rate movement) boosted the bank’s profitability. According to Pratip Chaudhuri, Chairman, SBI, “Our earnings have stabilised and this has become a new normal for SBI. This is in spite of the fact that provisioning has been a little higher than normally what we do. But we did not have to skimp on the provisioning.”

He pointed out that the challenge for the bank is on the bad loans front. During the reporting quarter, the gross and net non-performing loans increased by about Rs 7,500 crore and Rs 4500 crore, respectively. “In terms of NPA by sector, we have been able to contain the increase in NPAs in the large corporate book. But what has proved to be our nemesis is the increase in NPAs in the mid-corporates, particularly in the SME segment,” the SBI chief said.

Though the net interest margin (the ratio of net interest income to earning assets) was a tad lower at 3.57 per cent (3.62 per cent in the year-ago period), the bank has maintained its guidance of 3.75 per cent for FY13. Due to stress in the mid-corporate and small and medium enterprise segments, SBI will focus on segments such as home and car loans and large corporate loans to boost credit growth.

Deficit monsoon to impact loan re-payment: SBI chief

Amid concerns over rising bad loans, SBI today sounded a note of caution saying that failure of monsoon will not only affect the economy but also banks as re-paying capacity of borrowers will come under pressure.

In view of the deficit monsoon rain, Prime Minister Manmohan Singh has already directed all departments and ministries to coordinate with states to meet any eventuality by monitoring the situation on a weekly basis.

"If the monsoon fail it will (have) a cascading impact on credit growth as well as the economy which in turn will impact the re-paying capacity of borrowers," SBI chairman Pratip Chaudhuri told reporters in Mumbai.

He further said the State Bank of India (SBI) will assess the impact of monsoon after August 10 when the situation will become more clear.

Speaking on the impact of monsoon failure, PNB Chairman and Managing Director K R Kamath said in New Delhi that RBI has clearly defined norms for banks for agricultural credit in drought affected areas.

"If any of the area is affected by drought, there is very clearly defined scheme for restructuring of accounts of that particular area," he said while announcing the first quarter result of the bank.

Kamath does not expect the impact of deficient rains on NPAs related to farm credit to be much as there would re-structuring.

Gross non-performing assets (NPA) of PNB has risen to 3.34% at the end of three-month period ended June 30, 2012 as against 2% during the same period of last fiscal.

NPAs in public sector banks stood at about 3.3% of the assets in 2011-12 against 2.3% a year ago.

Meanwhile, IMD said it expects monsoon deficiency to narrow down in the coming days with improvement in rains.

Monsoon rains have been deficient by about 22% so far this year across the country with a worrisome situation in Karnataka, Maharashtra, Rajasthan and Gujarat.

The government has also set up an Empowered Group of Ministers (EGoM) headed by Agriculture Minister Sharad Pawar to review the monsoon situation.

Coming clean on NPAs

A Reserve Bank of India (RBI)-appointed panel has rightly recommended that all bank loans being subject to ‘restructuring’ be classified as non-performing assets (NPA). Currently, such loans are treated as ‘standard’, even when the terms of their restructuring involve banks taking a hit, whether through reduction in interest rates, elongation of repayment period, part waiver of principal or interest, and so on. Whichever way one sees it, restructuring entails borrowers being granted concessions that the banks would not otherwise even consider. Moreover, not treating these loans for what they are — in practical terms, their performance is nothing but ‘sub-standard’ — makes no sense when the amounts involved are not small either. Between March 2009 and March 2011, the gross NPAs of Indian banks rose from around Rs 68,000 crore to Rs 94,000 crore. But restructured advances, technically regarded as ‘standard’, soared even more from just over Rs 60,000 crore...

State Bank of Mysore Q1 net dips 38%

Bangalore, July 25:  State Bank of Mysore posted 38 per cent lower net profit for the April-June quarter at Rs 39.79 crore (against Rs 64.28 crore a year ago), mainly due to higher provisioning.

 

Total income rose 33 per cent over last year to Rs 1,566.7 crore (Rs 1,176.26 crore). Operating profit was Rs 298.57 crore (Rs 255 crore). Interest income grew 22 per cent to Rs 1435 crore.

 

In a stock exchange filing, the bank said it had made an NPA provisioning of Rs 196.9 crore during the quarter, which was well above the Rs 100 crore it provided for a year ago. Gross NPA was at 4.67 per cent (Rs 2.83 per cent) and net NPA 2.43 per cent (1.42 per cent).