Increase in NPA due to stress in iron, steel & textile sector: SBI

State Bank of India (SBI) today said that increase in its non-performing assets (NPA) was because it lend to the sector, which is in a way is the real economy, that is still in a significant stress. The sector mainly iron and steel and textile.

Pratip Chaudhuri, Chairman, State Bank of India, who was in Chennai today to donate a Tempo Traveller to Vidya Sagar NGO said that there has been a shortage of iron ore, because India is quite efficient in steel making and Indian iron ore were being exported, but due to ban on mining of iron ore companies operating in this sector could not get raw material but as the bans are getting Lifted things should look better.

It may be noted, SBI's bad assets as gross NPA level touched 5.30% in the quarter, compared to 4.61% in the same period last fiscal, with fresh slippages of over Rs 8,100 crore.

Chaudhuri said, more importantly there has been default by State Governments particularly the State of Andhra Pradesh should come in for a special mention. “They (AP Government) are running behind in compensating many contractors who have built roads, canals”.

The SBI Chairman also said generally the fourth quarter is the best quarter because this is the quarter in which State Governments realise lot of revenues and clear much of the outstanding areas.

“We hope that this trend continues,” said Chaudhuri.

In infrastructure the largest segment is power, followed by telecom. In power SBI's exposure is to well managed with state-run companies like NTPC, Power Grid, Neyveli Lignite Corporation.

So there is less stress and five state electricity boards – Punjab, Rajasthan, Uttar Pradesh, Andhra Pradesh and Tamil Nadu – are in difficult situation in terms of accumulated debt and losses, he said.

He added, SBI's exposure to textile sector is around Rs 8,000 crore

On Basel III, he said it makes Banks stronger, Basel III requires banks to have Tier 1 capital of 6% of their assets and as on March 31 we have 10%, said Chaudhuri.

On the outlook, he said, overall Banking outlook is good. This county has 30% of GDP is savings. “Our deposit growth is 15% year-on-year and loan growth is 17% year on year. Outlook is very promising,” said Chaudhuri.