State Bank of India Chairman Rajnish Kumar has said the problems in the IL&FS group with total liabilities of over Rs 90,000 crore can be solved and there’s no cause for concern. He told GEORGE MATHEW that the bank’s board will consider any funding proposal on merit. Excerpts:
Are you concerned about the situation at IL&FS with some group companies defaulting on repayments?
No. It’s not like that… it’s (projected) out of proportion. IL&FS has underlying assets. Whatever exposure we have, it’s at the SPV (special purpose vehicle) level which is ring-fenced. It’s a problem which can be solved. It’s not that the magnitude of the problem is such that it can’t be resolved. I’m optimistic about it.
Will it have any impact on the financial sector? The market witnessed a sell-off on Friday amid rumours of a debt crisis?
There’s no cause for concern. Some solution will have to be found out. We have much bigger problems in other sectors. Resolution will happen in the IL&FS. IL&FS will have to come out with a package.
What’s SBI’s exposure in IL&FS? What are the total liabilities of the group?
Our exposure is around Rs 3,800 crore but that’s spread across 10-12 special purpose vehicles. We have picked up small shares in them. They are all performing assets. Total liabilities of the group going around are close to Rs 90,000 crore. This includes everything… loans, non-convertible debentures etc.
Will you finance or invest in IL&FS? There’s a proposal for a rights issue and special credit line request for Rs 3,500 crore?
If there’s a right issue, our decision will be based on the valuation and resolution plans. If a proposal comes to the board, we will examine the proposal on merit and take a call. We need to see the resolution plan. We will get a clear picture by September 29… SBI lends support to NBFCs in private and public sector within the regulatory policy framework and will continue to do so.
There was panic in the market on Friday about the debt crisis. What’s your observation?
On Friday, I don’t know why such a panic happened in the market. The market is always so volatile. It was difficult to understand why they were going so much up. Then it’s difficult to understand why it falls and too much panic. It’s very clear that it’s not fundamental driven. If it was fundamentally driven, this type of volatility should not happen. There’s no change in fundamentals. There is no concern on liquidity of NBFCs in view of their liquid cash position and availability of committed lines.