SBI chairman flags NPA as area of concern

Says build-up of NPAs in banking sector due to general slowdown in economy over last couple of years

State Bank of India (SBI) Chairman Pratip Chaudhuri today said Non Performing Assets (NPA) remained an area of concern for the Indian banks.

He attributed the build up of NPAs in the banking sector to the general slowdown in the domestic economy over the last couple of years, which had seriously impaired the repayment capacity of borrowers.

Giving the example of the textiles hub of Kanpur, Chadhuri said there was general sickness in industry. “While disbursing loans, the bank had anticipated timely repayment by industry. But, the borrowers are not able to repay,” he said adding even the occupancy rate of hotels had come down drastically, signifying a slowdown.

However, he maintained the banks do not give up claims on bad debts and NPA write offs.

“Recently, we got Rs 40 crore from the sale of Lal Imli mill in Kanpur, although the loan amount had been written off,” he said at a conference call here.

The SBI Chairman said the Bank’s NPA was likely to reduce to Rs 51,000 crore from Rs 53,000 crore at the end of December 31, 2012.

On the need for capital to fund its growth, he said the Centre had infused about Rs 3,000 crore in the Bank and the government equity in SBI stood at about 63%.

“Even if we raise capital to the tune of Rs 13,000 crore to Rs 15,000 crore and there is no fresh infusion by the Centre, the government holding would still be 57-58%, much above the mandated 51% holding,” he added.

SBI is likely to take call on raising capital during the second quarter of the current fiscal, he informed.

Asked to comment on “slower transmission” of Reserve Bank of India (RBI) signals by the commercial banks with regards to interest rates, Chaudhuri said the key policy signal through repo was quite “weak” compared to Cash Reserve Ratio (CRR).

CRR stands at 4% and is the amount of cash commercial banks need to park with RBI. It does not earn banks interest income.

Chaudhuri is in town for a two day visit. Tomorrow, he would visit Rae Bareli, the parliamentary constituency of Congress president Sonia Gandhi for launching 10 new branches.