SBI examining options to increase provision on bad loans

The country's largest lender, State Bank of India (SBI), today said its provisions on bad loans are adequate but the cover may be increased if the need arises.

SBI has a provision coverage ratio (PCR) of 38.72 per cent. This being far below the industry average, the Reserve Bank of India (RBI) had recently asked the lender to increase the cover to at least 50 per cent.

"Generally, as per the prudential guidelines, it (PCR) is 40 per cent. But they (RBI) have been indicating that it should be at least 50 per cent," SBI Chief Financial Officer, S Ranjan, told PTI here.

 

Ranjan attributed the low provisioning to a single large account, which had earlier been classified as a non performing asset (NPA).

"That (low PCR) is because one account, Dabhol, got classified as a non-performing asset last year. It will now be re-classified as a standard asset. Automatically, the provision will go up to 43 per cent," Ranjan said.