How is your corporate lending segment doing?
Working capital utilisation is still subdued, and is less than what it was in March. On the other hand, we have had healthy growth in the term loans segment. As of December, SBI has seen term loans grow 16 per cent year-on-year to Rs 1.72 trillion. Last year, it was an exceptional situation for us because we had very large credit disbursements in the second half. This year, it is more in line with what used to happen in the previous years. In our domestic market, our advances are lagging by Rs 40,000 crore from what they were last year. However, we have seen good growth in the international banking group. So, in terms of overall advances, we are more or less at the March 2019 level.
What is your assessment of the inter-creditor agreement (ICA) framework under the June 7 circular?
There are 34 accounts where an ICA has been signed. If we leave out Dewan Housing Finance (DHFL), then in the January-March quarter we are hoping that we won’t see any surprises on the asset quality front. Of the 34 accounts, 21 are already non-performing assets (NPAs) and that constitutes a major chunk of the bad assets. SBI has an exposure of Rs 57,000 crore in the 34 accounts and the entire banking system would have an exposure of around Rs 2 trillion.
Is the ICA working?
The framework is alright. What we feel is it is difficult to resolve a company within six-seven months. So, for the ICA to function properly, at least nine to 10 months should be given. But if the resolution doesn’t happen within the prescribed time, then we cannot refer all the companies to the National Company Law Tribunal (NCLT). Now, lenders are taking a conscious call on what will be the recoveries if an account is referred to the NCLT.
Do you think the Insolvency and Bankruptcy Code (IBC) has been successful?
I am very satisfied with the IBC after the Essar Steel judgment. Foreign investors will also come back. We have seen foreign direct investment of more than Rs 42,000 crore in Essar Steel from ArcelorMittal, which is positive for the economy and the banking sector, as there will be further investments in that company. RattanIndia too has seen foreign investors coming in. We are seeing many resolutions happening. In December itself, we saw four — Essar Steel, Ruchi Soya, Prayagraj Power, and RattanIndia. Most probably Jaypee Infratech will be resolved by March. Then we may have Bhushan Power and Steel, Alok Industries, and Reliance Communications.
Are concerns about the asset quality of non-banking financial companies (NBFCs) stabilised?
Yes, NBFCs have substantial exposure to the real estate sector. Realtors who were holding on to inventory are now trying to get rid of them. There have been price corrections across several geographies. The National Capital Region has a lot of problem, but there is not so much of a problem in Bengaluru, Hyderabad, and Chennai.
So, it is true that there is huge inventory build-up, but this is not new. Now, the new launches have become less and some of the inventory is also getting cleared up. So, this will bring stability to the demand-supply problem.
Are you concerned about the Mudra loan portfolio?
SBI’s Mudra loan portfolio is 1.1 per cent of the loan book. So, even if there is 10 per cent NPA in that segment, it will not impact us that much. What impact us are accounts such as DHFL because suddenly Rs 10,000 crore worth of loans become NPA.
The RBI said NPAs may rise to 9.9 per cent by September 2020. What is your view?
Maybe the RBI is taking the telecom sector
into consideration. Otherwise, I expect SBI’s NPAs to be around 6-6.5 per cent in March 2020. I don’t think SBI will contribute much to the rise in NPAs.
I wouldn’t say we are not concerned. We have a large exposure to that sector. So, as long as the issues are not sorted out in the sector, there will be concerns.