We expect 18-20% growth in retail portfolio: A Krishna Kumar

Interview with MD & group executive (National Banking) SBI

At a time of tight monetary regime and sluggish macro-economic scenario, credit offtake has become a major concern for India’s banking industry. A Krishna Kumar, managing director & group executive (National Banking) of State Bank of India (SBI), talks to Rutam Vora on the credit outlook and state of corporate finances during the current financial year. Edited excerpts:

How is the current economic scenario impacting business?
Things are pretty much tight for the sector as a whole. We have to look at fresh GDP estimates from the government to be announced on August 31. Key rates are high and RBI's decision on interest rates in the next monetary policy will depend much on the GDP estimates, which has hovered at around 6.5 per cent so far. Credit growth depends much on the GDP estimates. There is potential for good growth in retail loans and as a bank, we are looking to increase our focus on our credit portfolio for the rest of the year. Our interest rates on retail loans like housing and car loans have been one of the lowest in the industry and we expect about 18-20 per cent credit growth in these segments this financial year.

Are large companies going in for big loans or following a wait-and-watch policy?
Existing economic factors are hurting the sentiment for corporate loans. Even if we sanction loans, not many drawings are taking place due to lack of good projects. Number of fresh projects has come down substantially and we are not seeing fresh big projects coming up. This may limit growth in corporate loans. But we are confident of our retail and SME segments to grow.

Are companies opting for overseas funding more because of interest rate differential?
There are other sources of finance available within the country itself. Some of the large companies are going for commercial papers market to raise cheaper funds than bank loans. Such finances are available at the interest rate of around 9.5 per cent. But that is limited to a few large corporates. As far as the preference for foreign finance is concerned, it depends on the external credit ratings and that is not very favourable for the Indian companies. Lower ratings by agencies like S&P or Moody’s to Indian firms have made foreign investors cautious. So it is not easy to get external borrowings instead of bank finance.

Do you see corporate debt restructuring (CDR) referrals increasing?
In the first quarter, we saw a huge jump in the CDR referrals. In this quarter, too, CDR referrals are likely to stay high and this trend may continue at least for some time. Large companies are more likely to go for CDR. On sectoral basis, textiles is a sector, where stresses are developing among mid-sized companies, while pharma sector is also one among the other stressed-out sectors. Such situation also affects small and medium enterprises (SMEs), which supply to large companies.

SME segment has shown high non-performing assets (NPAs). Does it worry you?
NPAs in SME segment is high across the banking industry. For SBI, the gross NPAs in the SME segment hovers around six per cent. However, we still see our exposure in the SME segment to increase by 15-18 per cent this fiscal. We are trying to tap lower end of SMEs and encourage them to take credits.