RBI may announce 25 bps cut in policy rates: Rajnish Kumar

Gross slippage was slightly higher in the April-June quarter, but there are two-three reasons for its increase, says Rajnish Kumar, chairman, State Bank of India (SBI). The analysis by SBI's internal chief economist suggests that there will be a rate cut of 25 basis points in the monetary policy review, he told Brajesh Kumar in an interview.

The bank has reported a profit in the first quarter, but there is an increase in fresh slippages. What can be the reason?

The bank's operating profit before provisioning is good and has increased by almost 32%, but recovery of around Rs 1,800-1,900 crore last year shows it as 10.67%. Gross slippage is slightly higher in the first quarter, but this time it is slightly more due to two-three reasons, on which we do not have any control. An account classified as NPA by Reserve Bank of India has been performing in every way, but one bank's failure to complete its documentation had made the complete banking system to pay for it. Apart from this, there is a slippage of around Rs 2,000 crore in agriculture in a state. In the case of the SME segment, account restructuring helped the bank to receive a benefit of around Rs 1,500 crore last year, which is why the comparable figures seem to be high this time.

What are your expectations from the RBI's credit policy?

Our internal chief economist's analysis suggests that there will be a rate cut of 25 basis points, and this is what we are expecting.

Which sectors are under pressure and which are doing good at this moment?

The auto sector was doing good in the past, but it is on a declining trend on the sales front. However, the Union Budget has been presented and I feel there will be a pick-up in certain sectors like affordable housing because the government has an emphasis on it and has an allocation in the Budget. If I have a look at the project pipeline at our bank then I can see investment opportunities in the gas and oil sector because we have a good order pipeline like city gas projects, among others. Similarly, good investments will be made in the road sector and NHAI will also come up with the demand for funds. So, as soon as there is an improvement in NHAI funding position for road construction, then that money will also flow into the system. Similarly, there is an improvement in the renewable energy segment. So, there is a scope of demand from these three sectors.

Will the bank come up with further risk tightening exercise for the sectors facing problems when they come up for new loans?

It is not about risk tightening measures or scrutinising those accounts but the model of the bank. Particularly in the case of retail, it is reviewed periodically and changed from time to time. The industry exposure limits of the bank are also reviewed periodically after which our risk management department issues guidance for it with a suggestion about the sector where our approach should be conscious and where it can be liberal. So, portfolio level review, as well as credit rating models for individual lending, is a normal process, which changes periodically in every quarter.

In one housing finance company account MFs have problem. So how will you proceed on resolution?

As far as the housing finance sector is concerned, then mutual fund doesn't have clarity on signing the inter-creditor agreement, but it doesn't mean that it can't participate in the resolution process.

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