SBI's trying to resolve six-seven power assets, says Rajnish Kumar

Country's largest lender, State Bank of India (SBI) on Friday reported a surprise loss of Rs 4,876 crore in the first quarter ended June 30. Chairman Rajnish Kumar feels that the profit in the July-September quarter would be contingent on the National Company Law Tribunal (NCLT) approving a resolution of one large account. In an interview with Anurag Shah of Zee Business, Kumar said the bank is planning to sell a 4% stake in its subsidiary SBI General Insurance this financial year.

The bank has posted a loss for three consecutive quarters. What's the reason?

A large depreciation in the value of government bonds in June quarter was one of many reasons. On June 30, 2018, the bank went for Rs 5,900 crore mark-to-market provisioning for the same. Reserve Bank of India (RBI) gave us a dispensation of four quarters for the same, but we, the Board and the management, wanted to end it in this quarter to make sure that the hangover of Rs 1,500 doesn't exist for remaining quarters.

We have seen an improvement in the net interest margin. What are the areas that are leading to this improvement? Can you also share details regarding the resolution process of NCLT cases and your expectations from them?

Bank's control of the cost of funds is one reason for the improvement in its net interest margin and we are also trying to increase yield on advances. This has resulted in a 12% increase. Similarly, a 24% increase can be attributed to interest income writebacks from two NCLT accounts. Currently, the bank's net interest margin at domestic level stands at 2.95%, but the removal of the impact of these two accounts reduces it to 2.8% in June, and we are trying to increase it in the near future.

Let's talk about non-performing assets (NPAs). Which are the sectors where the pain is visible? Is recovery seen in infrastructure?

Recoveries are visible. The main thing is related to the provisioning of the losses due to loans and State Bank of India is at a place where provisioning is about to complete. When it comes to power sector assets, we know that any attempt to sell them will help us in crystallising the losses. We are trying to go for resolution of six-seven power assets and their resolution will definitely have an impact on our September quarter results. The best part of their resolution is that it will help us end the power sector stress on the bank. Resolving such assets will help us in strengthening our position in terms of NPAs and provisions.

Will SBI take its positions in the rights issue of IL&FS? If yes, then what will be the reason for such a decision?

No, we have not taken any decision on it and we have not received any written request for it. The bank will take any decision on it after receiving any such request. The decision will be made after considering the investment policy of the bank and understanding the prevalent circumstances.

Which are the companies where value unlocking has been planned? Also, what are the possible timelines for it?

Next year, we will be unlocking the values of three companies namely, SBI General, SBI Mutual Fund and SBI Cards. In fact, we have started with the process for SBI General. We are looking to sell a 4% stake in the general insurance arm and this trial will help us determine its value and act as a precursor for the IPO (initial public offering). Process for the remaining two companies will be started soon.