A loan default of 30 to 60 days will push the account to the stressed assets management group (SAMG), instead of the earlier practice of waiting for 90 days
Rajnish Kumar, who took over as State Bank of India (SBI) chairman in October last year, is furiously working on a restructuring plan to break the bad loan cycle that is threatening the health of the entire banking system in India.
A man known for his fearless and quick decision-making abilities, the 60-year-old has also taken up the challenge of putting in place strict credit appraisal systems that will weed out dubious projects where promoter equity gets dressed up through bank finance.
Under Kumar's vision, there will be speedier recognition of stress in loan accounts. A loan default of 30 to 60 days will push the account to the stressed assets management group (SAMG), instead of the earlier practice of waiting for 90 days. This vertical will be beefed up further with experts and technical hands, who will plan out restructuring and recovery specific to the sector.
The idea is to get every person accountable and roles clearly defined. "One who does business related to credit acquisition will not sit on the committee that sanctions the same loan. The risk committee will have the sanctioning power along with the credit approval team," Kumar told DNA Money.
Under the new lean SBI structure, the number of pure corporate branches will shrink to four from the existing eight. Corporate branches in Hyderabad, Ahmedabad and Kolkata will close down. These branches will then add a number of technical professionals, laterally hired by the bank. The strengthened team at the corporate branches will whet all proposals of Rs 50 crore and above. For loans of over Rs 25 crore, the commercial credit group will lend its approval. This group will now have just 44 branches, down from the existing 55 branches.
"In keeping with the highest standards of compliance and non-conflict situations, the business officers will not head the credit committees. These committees which will finally sanction the loan will be headed by risk and non-business officers so that they can take an impartial view on the loan proposals," said Kumar.
The bank will also have a non-credit relations department that will cater to the banking needs of multinationals like Hindustan Unilever, Nestle and others who have a large ecosystem with a wide network of distributors and suppliers.
The bank is also looking to rope in a joint venture partner for its wholly-owned subsidiary, SBI Capital Markets, as part of a restructuring plan that aims to segregate project financing from investment banking. The plan is to get on board an investment bank having a global presence. SBI will hold a majority stake in the JV.
CAPITAL SHIFT
- SBI to sell a minority stake in SBI Capital
- Restructuring of SBI Caps follows RBI highlighting the need to prevent duplication of project financing function by the bank and the investment banking subsidiary
- Project financing, which contributed 90% of the SBI Capital revenue last year, will be moved back to the bank
- SBI Caps will do pure investment banking
LEANER STRUCTURE
- 30 to 60 day defaults will be referred to stressed assets management group
- Lean organisation with fewer branches
- Corporate branches will shrink from 8 branches to 4
- Commercial credit group will shrink from 55 branches to 44 branches
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