Having done and dusted all the bad loans on its books, the country’s largest lender State Bank of India (SBI), hopes the current financial year will be a turning point in all respects.“Not only will the financials improve going forward, efforts will also be directed to achieve a more sustainable mix of business, both domestically and in overseas operations,” Rajnish Kumar, chairman, SBI wrote to the bank’s shareholders in its FY19 annual report.
Taking cues from last year, SBI is targeting a credit growth of 10-12 per cent in FY20, which Kumar hopes is doable going by the credit revival and recoveries seen in FY19. Last year, it was envisaged that growth in business will be achieved by portfolio reordering that will reduce the credit risk weighted assets to total advances ratio and internal reorganisation of corporate banking.
“However, a sustainable recovery is not just a mechanical arithmetic but it also requires deep structural transformation and strategic shifts in portfolio. Such an exercise should ultimately improve the RoA, minimise asset liability mismatches and reduce the payback period of our investments,” he noted.
Accordingly, SBI’s transformation strategy going forward will focus on five areas: Customer Service, Corporate Credit Revamp, Digitisation of Banking operations, Synergy between subsidiaries and Development of our human resource. SBI already has a large customer base and says it believes that the benefits of retaining existing customers far outweighs the cost of acquiring new customers.
Meanwhile, allaying fears of bad loans, Kumar said exposure to stressed sectors like real estate and telecom were being reviewed once every six months, while sectors such as power, telecom, iron and steel, textiles, which are going through a challenging phase, are being watched continuously. “Strengthening of credit processes and increased product penetration across high priority relationships have been and will be our guiding principle going forward,” he said adding that the bank has started the revamp of the corporate credit structure and system within to widen its client base and focus on new segments.
According to Kumar, the all-round effort in managing stressed accounts in FY19 resulted in fresh slippages being contained at Rs 32,738 crore, a reduction of 65.5 per cent the from previous year. Recoveries and upgrades during FY19 more than doubled from last year’s Rs 14,530 crore to Rs 31,512 crore in March, 2019. NPA ratios declined across all segments, with corporate segment registering the steepest decline from 21.92 per cent in FY18 to 13.62 per cent in FY19. Despite the ups and downs, the average recovery rate in stressed accounts under the NCLT route was in excess of 60 per cent.
Slippages contained
All-round efforts to contain stressed accounts in FY19 resulted in fresh slippages being contained at Rs 32,738 crore, a reduction of 65.5 per cent the from previous year. Recoveries and upgrades during FY19 more than doubled from last year’s Rs 14,530 crore to Rs 31,512 crore in March, 2019, according to Kumar