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.

There is room for rate reduction: SBI chief

Citing State Bank of India’s example, finance minister P Chidambaram on Saturday prodded other banks to reduce EMIs to boost demand. The daily loan sanctions of the country’s largest lender have increased from 400 cars to 1,200 after EMIs were reduced from Rs 1,766 a lakh a month to Rs 1,699 a lakh a month.
Taking a cue from the minister, SBI chairman Pratip C Chaudhuri told TOI in an interview that there is scope for a further reduction in rates but the bank will be selective. Instead of an across-the-board reduction, SBI will look at sectors where lower EMIs would help push demand. Excerpts:
The FM used SBI’s example to ask other banks to reduce EMIs…
Our decision on consumer durables is the result of what the Reserve Bank has done. We decided that we will share the benefit of whatever excess SLR we are sitting on. Today, if you look at the loan demand from the corporate sector, there are very few projects that are taking off and investment is also low in power, steel or cement. As far as working capital is concerned, people are borrowing below the base rate, and they are borrowing through commercial paper. So, you can’t just push loans in this space. So, we have decided to focus on the retail side and try to push whatever demand is possible.

But why not home loans too?
In case of auto loans, the response is quicker. You sanction a loan today and the person purchases a car in two days. In case of home loans, it takes a while — if I sanction a loan today it will take a few months, if not more, for the entire amount to be disbursed.
Is there further room to reduce rates, even if it’s on the retail side?
Yes, there is room for reduction. We will reduce rates wherever there is the possibility of increasing demand. You look at the retail outlets, there is an immediate increase in demand whenever there is a discount. That’s been our experience too. We cut interest rates for SMEs and now we have done it for cars, where the demand has increased. The only way to improve sentiment is to get people to buy and get people to invest.
The FM also said that he will try to resolve problems related to environmental clearances and land acquisition. What else needs to be done?
Public sector companies and some core sector players are sitting on cash, which needs to be deployed. For instance, the railways can be asked to invest in adding new lines and capacity. Similarly, NTPC and other PSUs need to accelerate capacity addition so that others also join later.
But there are sectors such as roads where companies are unable to take up new projects as they cannot raise fresh equity…
The problem is not due to their ability to raise equity. Agencies such as NHAI, state PWD and state electricity boards are delaying payments. NHAI is invoking guarantees which is making it difficult for companies and creating uncertainty. We have flagged this issue too.
Will lending also get a boost once some of the sectoral issues such as those in power, textiles, and telecom are sorted out?
We do not have much exposure to discoms. But the fact is that they cannot run up losses and delay payments. It will certainly help if the problems are resolved. In other sectors, such as textiles, companies have suffered due to exchange rate-related problems and some of them were over leveraged. In case of telecom, there is no problem with companies that had got licences prior to 2007. They are very strong, enjoy good ratings and have the ability to put more capital. Now that spectrum can be used as a collateral, we will be in a better position to lend.
What about your own problems with NPAs? How much was it due to loan restructurings in 2008?
The worst is over and in the next two quarters, things will look better. Some of it is due to 2008. The outlook then was so buoyant that people lined up huge capital expansion and some of the demand did not materialize.
Is there any progress on capital infusion given that there are suggestions that the government may delay it due to tight fiscal position?
We will get it soon. Last year too, we received capital and the government is keen to demonstrate that it is behind banks and expanding the economy. Our internal generation is quite good and we have taken steps to use capital more efficiently. So, there is no rush at the moment.

Make it easy for students to get education loans, bankers told

New Delhi, Aug 18:  Finance Minister P. Chidambaram has come to the rescue of students facing difficulty in getting education loans. Henceforth, a bank manager will be penalised for “wilful rejection” of eligible education loan applications.
At the same time, it has been decided that students securing admission under management quota will also be eligible for education loans. However, they will get loans only if they meet various criteria such as the minimum required marks, etc.  These steps are part of a new set of education loan guidelines to be issued soon.  They were discussed in a meeting called by the Finance Minister to review the performance of public sector banks.
Addressing the media after the meeting, Chidambaram said, “Bank loan is a right of students meeting all the parameters. That is why each of the applications should be received and acknowledged.”  He announced that officers receiving applications cannot reject them — only a person who is at least one level senior to the receiving officer can do so. Even then, there should be a proper reason given for rejection of the application, he said.

Pulls up bankers’ body
Banking body Indian Banks Association (IBA) has already issued a circular regarding model education loan scheme. This has attracted the ire of the Minister. He showed his displeasure by asking the IBA to issue a revised circular incorporating various changes discussed and agreed upon. He also announced that the Cabinet will consider the creation of a Credit Guarantee Fund in a fortnight. This fund was announced in the Budget this year. This scheme aims to ensure better flow of credit to deserving students.

Bad loans
Talking about Non Performing Assets (NPAs), Chidambaram allayed fears by saying that the rise in NPAs was “not alarming.” Banks are also making adequate provisions for bad debt, he said. During the first three months of the current financial year (April-June), gross NPAs (as a percentage of gross advances) of public sector banks went up to 3.51 per cent from 2.57 per cent. Net NPAs have registered a 1.72 per cent rise, as against the 1.14 per cent rise in the same period of the previous year.