State Bank to cut bad loans to 1.6% in FY13

Stressed Asset Management Group recovers Rs 1000 crore in cash in 2011-12

State Bank of India on Tuesday said it would reduce the proportion of its net non-performing assets (NPAs) to the total from the present 1.8 per cent to 1.62 per cent this financial year.

Only yesterday, Union Finance Minister Pranab Mukherjee had expressed concern over the asset quality of banks. To achieve the target, SBI, the country’s largest bank, constituted a Stressed Asset Management Group (SAMG) during the past financial year. According to Pratip Chaudhuri, chairman, the SAMG managed a cash recovery of around Rs  1,000 crore during 2011-12 by working on these NPAs, the highest in a single year in the bank's history.

He was speaking to reporters after handing over keys of an ambulance van to the Cancer institute here, as part of SBI’s corporate social responsibility programme.

The SAMG has around 400 people and has opened nine offices, focusing only on stressed assets. "We are asking the borrowers to consider restructuring loans, ahead of default. Most of the stressed assets are related to exports, especially of the textile industry,” said Chaudhuri. Asked if the bank would sell these stressed assets, he said, “Last year we could not, since asset reconstruction companies did not have cash.”

He said the bank was planning to approach Moody's, the global rating agency, to review the latter’s earlier negative rating to SBI. The move is on the backdrop of an increase in the bank’s equity capital, with Rs 8,000 crore infusion by the government in March. “As our capital position has strengthened, we will go back to them (Moody's) to rate us again,” said Chaudhuri.

Deputy managing director Sharad Sharma said, "One major issue they (Moody’s) had while rating the bank relates to uncertainity of capital. Since we have enough capital now, we are planning to approach them for re-rating." Apart from the Rs 8,000 crore equity infusion, SBI made Rs 11,000 crore profit last year.

“The bank’s capital is comfortable now,” said Chaudhuri.