NPAs will not be as high as Q2 and Q3: SBI

‘No major slippage,banks recovery yielding good results’

Written by Sandeep Singh | Mumbai | Published: April 6, 2012 1:08:24 am

After a bad third quarter — October- December 2011 — that witnessed a sharp rise in the non-performing assets (NPAs),the country’s largest lender State Bank of India,expects to rein in NPAs even as the quantum of loans restructured may witness an increase.

While the numbers are still being finalised,officials close to the development said,NPA levels would not rise much from the exiting levels as there was no major slippage (similar to Kingfisher Airlines) in the quarter and the banks recovery process had started yielding good results.

“The trend on NPAs is encouraging and the slippages will not be as high as in Q2 and Q3,” a senior SBI official told The Indian Express on conditions of anonymity. “Also the bank formulated a structure for recovery of retail loans and has devoted more human resources to it. Since retail loan is ‘effort elastic’,this has now started yielding results. Things have improved on the retail front and it is helping in recovery and controlling the slippage,” the official said.

In the quarter ending December 2011,loans worth Rs 6,000 crore turned bad for SBI and the net NPA levels rose to 2.2 per cent of total advances. The bank expects the stress in certain industries to continue for now.

“Sectors such as textiles,iron & steel,construction,power and aviation continue to remain stressed. I think the stress in the industry will continue for at least the first two quarters of FY’13. What is affecting companies is rising raw material cost and low demand,” said the banker.

Recently,Crisil said in a report that among the number of companies it rates,the default rate was at a 10-year high. The banker said that it has to be true. “In 2008-09,we thought the worst was over. But unfortunately,2011-12 things have further slipped. It is because the whole environment,both inside India and outside,has not contributed to improving anything anywhere,” said the official.

The official noted that this has resulted in a rise in the restructured loans of banks. This is set to increase from around Rs 31,000 crore in the quarter ended December 2011. “Restructuring is on a rise,” said the official adding that it is important in the current environment as “we can’t just be ‘fair weather’ friends.”

While the restructuring is not undertaken without a techno-economic viability study,the official said that it is being pursued since the problems that the businesses have are mostly external. “These accounts have got their businesses running. There are factories,thousands of people working and the production is on. The problems such as rise in the input cost,operating cycles turning longer are external. And then,there are issues of liquidity.”

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