State Bank of India (SBI) will approach Moody’s Investor Service to review its rating, which was downgraded by the global rating major in October last year due to its lower tier-I capital ratio and deteriorating asset quality.
Speaking to the media here after it posted robust numbers for the quarter, Chairman Pratip Chaudhuri said, “After the infusion of money by the Centre, our tier-I capital adequacy ratio stands at 9.79 per cent compared to 7.77 per cent in March 2011. The downgrade that happened was possibly not read in its full detail. One instrument, (innovative perpetual debt instrument) was downgraded to ‘D+’, from ‘C-’. Our overall rating remains the same. Now that the capital ratio has improved, we will ask Moody’s to reevaluate and re-rate the bank.”
The Moody’s downgrade came after SBI reported tier-1 capital of 7.6 per cent as of June 30, 2011.
SBI’s tier-I capital eroded as it had to make provisions for pension of nearly Rs 8,000 crore from its capital reserves in the fourth quarter of the previous financial year. Now, tier-I capital has improved after an Rs 8,000 crore capital infusion by the government in March this year.
“Apart from this, the robust internal generation and efforts to optimise use of capital by going for schemes like CGTSME (credit guarantee fund trust for micro and small enterprises) and ECGC (export credit guarantee scheme). Our asset quality was under pressure in the third and fourth quarters of the previous financial year. We had declared a war against NPAs (non-performing assets). We are seeing positive signs and gross NPAs were reduced on a sequential basis. Now we don’t see a huge drop in asset quality,” Chaudhuri said.
Regarding CAR, he said, “We are aware of RBI’s Basel-III norms but at the moment we are comfortable and there is enough room for growth. If any requirement arises then accordingly we will take measures. We may go for qualified institutional placement (QIP) since government has 62 per cent stake now.”
During the January-March quarter, the bank’s restructured accounts amounted to Rs 8,571 crore, while the total restructured accounts stood at Rs 37,168 crore. Above 15 per cent of all restructured accounts has turned NPA. “It is not a concern for us now, as only 5 per cent of them turns in loss due to non-repayment.”
According to SBI officials, Kingfisher has turned into a doubtful account for the bank with an exposure of about Rs 1,400 crore, while its exposure to Air India is around Rs 1,200 crore. The lender has said that it will give additional stress on retail front.
“We will have to see how the markets remain in the coming days but we are expecting a loan growth of 16 per cent. On deposits, I feel there would be a growth of 20 per cent. Our main thrust will be on retail, which can be a challenge in such environment but we will be focusing on that front,” he added.
Chaudhuri said the bank would not go for bulk deposits and expected growing retail deposits could be challenging this year.