SBI poaches big-ticket corporate loans

In an aggressive move, the lender grabs Nuclear Power Corp and Gujarat Power Corp loan accounts

Dangling the carrot of cheap loans, State Bank of India (SBI) has turned aggressive in taking over blue-chip (with credit rating of AA and AAA) corporate loans from rival banks, especially public sector lenders.

SBI, the country’s largest lender, has picked up loans worth Rs 8,000 crore including that of the Nuclear Power Corporation from Bank of India and the Gujarat Power Corporation account from Power Finance Corporation.

“There is trade-off. We have not lowered the risk bar, but the price bar (read cheap loan). The focus is on corporates with high credit rating,” said a senior SBI official.

SBI’s large corporate loan book grew by 40.3 per cent in 2012-13 to Rs 1,75,831 crore by the end of March.

Admitting to an adverse impact on business, senior Bank of India officials said: “Some corporates who were our clients for many years have moved overnight after getting cheaper loans. They have sent settlement money through cheques or through electronic transfer and do not want to discuss matters further.”

SBI had also re-financed loans to Utkal Aluminum (Rs 4,000 crore), Aditya Birla Group unit, based on the comfort (guarantees) provided by Hindalco Ltd, the SBI official said. The lender has been using a similar strategy to grow its home loan business. Its home loan portfolio rose by 16.3 per cent in FY13 to Rs 1,19,467 crore by end-March.

With a large pool of low cost current and savings deposits at 46.5 per cent, SBI’s cost of funds is less than that of its competitors. Its base rate is 9.7 per cent, while most public sector banks have their base rate above 10 per cent.

Asked if the bank is also using a similar strategy for medium-size companies, the SBI official said the bank is cautious about this segment of corporate units, which “have shown high stress level (defaults and need for restructuring loans)”.