Seek more time to repay corporate loans: SBI

Kolkata, August 29: “The other day, we received a (loan) proposal for setting up a hotel, with a repayment period of eight to nine years. I told my officers ask this gentleman to take the loan for 12-13 years...Our advice is in the future, whenever you are applying for a loan, try to negotiate for a longer repayment tenure,” said Chairman Pratip Chaudhuri.

Such advice is aimed at capping a further rise in the bank’s restructured loan portfolio. In 2011-12, SBI’s restructured loan portfolio nearly doubled to Rs 8,093 crore from Rs 4,979 crore a year earlier. In the quarter ended June, the bank restructured loans worth Rs 564 crore. At the end of June, SBI’s total restructured loan portfolio stood at Rs 36,904 crore. Of these, loans worth Rs 7,373 crore were classified as non-performing assets. The Reserve Bank of India (RBI) has proposed tough norms for loan restructuring, and if the new rules are implemented, the provision burden on the bank would rise, eroding its profitability further.

Chaudhuri added SBI would not penalise its borrowers if they wanted to pre-pay loans ahead of the repayment schedule. “In the current scenario, with the rules RBI has proposed, it is difficult to increase the tenure after the loan is sanctioned. It would increase the burden on the bank. So, we are telling our customers to negotiate for more time. If one is able to repay ahead of the schedule, it is fine — there would be no penalty for pre-payment,” he said.

However, most banks were reluctant to agree. “The repayment period is based on the projected cash flow. The schedule is fixed after making a conservative assessment of the earnings, and taking into consideration the risk factor. We have no immediate plans to deviate from this practice,” said the chairman and managing director of a Mumbai-based public sector bank, requesting anonymity.

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.