SBI group requires Rs 1 lakh crore to meet Basel-III norms

Chennai & Mumbai, September 7: The State Bank of India and its associates and subsidiaries will require around Rs 1 lakh crore of capital over the next five years to meet Basel III norms (in addition to retained earnings).  Diwakar Gupta, Managing Director and Chief Financial Officer of SBI, told Business Line this was based on a 20 per cent growth rate, and a return on equity of between 18 and 20 per cent. He conceded that the estimate could vary since growth rates during the last year as well as current year are lower.
The RBI estimates that Indian banks would need about Rs 5 lakh crore in the next five years to get ready for Basel-III norms that will be effective from 2018. The norms, developed in the backdrop of the global crisis in 2008, impose higher capital prescriptions on banks to cater to various risks.
Asked about the capital that the bank would receive from the government in the current year, Gupta said, “The number being bandied about in the press is closer to Rs 4,000 crore. We are reasonably comfortable with capital. Rs 4,000 crore will see that we don’t breach anything.”
SBI received Rs 7,900 crore infusion from the government last fiscal. He said, “We don’t need further capital under Basel III all the way up to 2015. Counter-cyclical buffer introduction may require capital beyond 2015. The extra 2.5 per cent will come up in 4 tranches and the fiscal 2015 may require a little capital.”

Capital conservation
Gupta also said that the bank would continue with its capital conservation strategy (routing SME, export credit through guarantee schemes thereby reducing the credit risk on such assets and also lowering the capital requirement on the loans). The measures had contributed to a 62 basis point rise in the tier-1 ratio of capital last fiscal (one basis point is one-hundredth of a percentage point). SBI had a capital adequacy ratio of 13.8 as of June with tier-1 ratio at 9.8 per cent.
He added, “We will try a couple of other levers, but by and large we will improve the integrity around our data and around our ratings better. We clawed back 91 basis points totally last time. Hopefully this year, we will do another 25- 30 basis points based on the same parameters.”

Rating agencies
Asked if the improvement in capital ratio would warrant a ratings upgrade by rating agencies, Gupta said, “It is very hard to say. Our stock is taking a beating. In the short term, markets reflect the mood more than the basics and I think that is the case for rating as well. Asset quality is a problem for all banks and therefore the rating agencies are well within their rights to say that there is enough stress to warrant a ratings revision. But another big item that they said affected the ratings was the inability of State Bank to raise capital at will. Now this has not changed since 1955. Why suddenly that should become an important factor while re-considering a rating? I think it is more a factor of perception than fact. We will, of course, ask the rating agencies to review our performance which is quite strong.”
Gupta said that SBI was delivering the second largest corporate profit in the country and was the largest taxpayer. “That is something the rating agency should also look at,” he added.

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: 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.

SME loans: SBI to close one-time settlement scheme

Mumbai, August 7: State Bank of India is closing its one-time settlement (OTS) scheme for bad loans of small, micro and medium enterprises due to disappointing response. A senior official of the country’s largest lender said the response to OTS has been less than desired. The repayment capacity is under severe strain, making it tough to close chronic accounts.

SBI’s total gross non-performing assets were about Rs 39,676 crore at the end of March 2012. Out of which, SMEs’ share was Rs 11,929 crore (30.1 per cent). The total SME portfolio was Rs 1,39,175 crore at the end of March 2012.

Under the scheme, the persons concerned would have to pay upfront five per cent of the loan taken for settlement of the dues within a year. It was part of the effort to recover and settle loan accounts. The scheme provided discounts of 15 per cent to borrowers who make full payment within a month and 10 per cent to those paying back in three months from the date of approval of the OTS.

Diwakar Gupta, managing director and chief financial officer, SBI, said small and micro enterprises face a challenge is growing the top line in the current economic downturn. Also, their input costs are growing.

In June, the country’s largest public sector lender has cut lending rates across all borrower categories to ease pressure on repayment.

SBI passed on the benefit of reduction in cash reserve ratio. There is an overall reduction in interest rates in the range of 50 basis points to 350 basis points across all categories of borrowers.

It had introduced separate rate structure for SME borrowers covered under the credit guarantee scheme. This is applicable for limits up to Rs one crore to encourage SME borrowers to obtain guarantee cover and ensure enhanced credit flow to this segment.

SBI cuts interest rates on Home & Car loans from August 7

Mumbai, August 1: The country's largest lender State Bank of India will cut rates on its home and auto loans. The move comes close on the heels of the Reserve Bank of India cutting the statutory liquidity ratio for banks in its policy statement on Tuesday.

 

SBI will cut rates on home loans by 25 bps and on auto loans by 50 bps, the bank's chairman Pratip Chaudhuri told ET NOW in an exclusive interview. The new rates will be effective from August 7. The bank, however, is not in a position to cut its base rate at present.

 

"We need to use interest rates as an instrument to increase credit flow. We are targeting home and auto loans because the pass through in both these segments will be the fastest," Mr Chaudhuri said. SBI's asset liability committee met on Wednesday evening to take a call on interest rates following the RBI's policy.

 

According to Mr Chaudhuri, "there is very weak corporate demand and it won't make business sense to cut rates for corporates at this juncture." However, he added that a pick-up in demand from corporates may lead to the bank looking at reducing rates for corporates.

 

SBI has in the recent past cut rates on its SME and auto loan portfolios but this is the first home loan rate cut by the bank in a few quarters.

 

Though the bank hasn't taken any call on deposit rates yet, Mr Chaudhuri mentioned that SBI is seeing a surfeit of deposits at a time when the rest of the banking industry is starved of deposits. The bank will declare its Q1 earnings on August 10.

 

PTI Reports:  New Delhi, August 1: State Bank of India today slashed lending rates on car and home loans by up to 0.5 per cent, a day after one per cent cut in SLR by the Reserve Bank. SBI has reduced interest rate on home loans of up to Rs 30 lakh to 10.25 per cent from existing 10.50 per cent (after 0.25 per cent concession over the card rate), a senior bank official said.

 

On the home loans of beyond Rs 30 lakh but less than Rs 75 lakh, the new rate will be 10.40 per cent against the existing 10.75 per cent, down 0.35 per cent.

 

The new rates will be effective from August 7, the official added. The base rate or minimum lending rate of SBI stands at 10 per cent. Base rate is the benchmark rate below which a bank cannot lend.

 

With regard to the car loan, the reduction is to the extent of 0.5 per cent. The new car loan would be 10.75 per cent against the existing rate of 11.25 per cent for a seven-year loan. Now for every Rs 1 lakh, a customer has to pay Rs 1,699 EMI against Rs 1,725 per month earlier. SBI claimed this as the lowest EMI. With the reduction, a borrower would end up saving Rs 312 per year on every one lakh.

 

Yesterday, RBI in its quarterly monetary policy review reduced Statutory Liquidity Ratio (SLR), the amount of deposits that have to be invested in government bonds and other liquid assets, by 1 per cent. RBI Governor D Subbarao cut the SLR to 23 per cent, thereby releasing around Rs 68,000 crore of additional liquidity into the system, even as he left all the key interest rates unchanged in the anti-inflationary stance.