'We may have to restructure loans to textiles, steel, real estate sectors'

Q&A: A C VERMA

State Bank of Patiala (SBoP) is the only public sector bank with its headquarters in Punjab. With the financial sector under pressure globally, the State Bank of India (SBI) associate has evolved a strategy to offset the impact of slowdown. SBoP Managing Director A C Verma tells Komal Amit Gera the bank’s expansion plans and cites several opportunities for growth. Excerpts:

How have you prepared yourself for the current turmoil?
To a certain extent, the slowdown is a correction. Markets were overheated. A correction was indeed the need of the hour. As far as the preparedness of my bank is concerned, I am not at all shaky. We have a sound repayment flow and my bank’s non-performing assets (NPAs) are 1.30 per cent of advances (on a gross basis) and 0.50 per cent (on a net basis).

Have you identified any critical areas where loans need to be restructured?
Our exposure to textile and hosiery units based in Punjab is significant. A recession in the US may hit their bottom lines and they may borrow less. After this, steel and real estate may be affected. So, we may restructure loans in these sectors.

How will you maintain a desirable rate of growth?
We posted growth of 24 per cent last year. We have scaled it down to 20 per cent, keeping in mind the market imperfections. There are many untapped areas where lending is possible. We are promoting dairy farming, poultry and post-harvest processing facilities (rice-shellers) and other allied activities of agriculture in a big way.

We have proposals of over Rs 1,000 crore for lending to such projects and viability studies are under way. So, there is no dearth of investment opportunities for us.

What is your exposure to infrastructure?
We have lent about Rs 2,000 crore for various infrastructure projects, mainly related to the road sector. We are open to funding power projects that are planned in Punjab and Haryana, if viable.

Have auto loans been affected by the current meltdown?
The repayment of auto loans was smooth, owing to a short repayment period (of three years or so). The need for a vehicle cannot be postponed and first-time buyers are coming forward (for loans).

What about the demand for home loans?
Those who buy a house to meet their housing need are still in the market. The speculators have vanished. Our exposure was more to the middle-income group, which consists of genuine buyers, and so we extend finance for home loans.

What about your expansion plans for the year?
This is an ideal time to expand. The problems have reinforced the faith of customers in public sector banks.

People are coming forward to open accounts with us. We plan to open about 40 new branches this year, particularly in remote areas. We have consolidated our network in tier-I and tier-II towns last year by adding over 40 branches in Madhya Pradesh, Gujarat, Maharashtra, besides Punjab and Haryana.

The bank has a network of 829 branches and 42 extension counters across 13 states and union territories.

How much benefit have you received following the Reserve Bank of India’s moves?
 Our reserves grew by Rs 1,000 crore as a consequence of the cut in the Cash Reserve Ratio (CRR) and about Rs 700 crore because of the reduction in the Statutory Liquidity Ratio (SLR). We did a business of about Rs 100,000 crore by September 2008.