Bank's watch list of such loans bloats 143% to Rs 32,427 crore following merger of five associate banks
The merger of associate banks has bloated the State Bank of India's (SBI) watch lists for stressed loans, but with high provisions (capital set aside as a buffer against stressed loans) the bank has ensured that resolutions also take place faster.
SBI had a watch list of Rs 13,310 crore at the end of the quarter ended March 31, 2017, but post the merger – from April 1 2017 – the watch list of the merged entity zoomed by Rs 19,117 crore to Rs 32,427 crore, a rise of 143%, as the stressed loans of the subsidiary banks were added.
Highest additions to the watch list from the associate banks came from the power sector, which saw an addition of Rs 8,284 crore stressed assets followed by telecom at Rs 2,345 crore and iron & steel at Rs 1,709 crore.
Dinesh Khara, managing director, associates and subsidiaries, SBI, told DNA Money, "Subsidiaries had exposures to the state electricity boards (SEBs), which got added to the watch list. Iron & steel and construction sector accounts were found to have stress, so we have put them on the watch list and provided for these accounts."
Gross NPAs of the bank stood at Rs 112,343 crore in the fourth quarter of the last fiscal, about Rs 4,000 crore higher than the preceding quarter. During the quarter, the bank also put Rs 3,992 crore into the Advance Under Collection Account (AUCA) – or written-off accounts where recovery processes continue. Total loans under the AUCA for 2016-17 stood at about Rs 20,570 crore.
Provisions were kept very high. At 65.65%, the provision coverage ratio (PCR) is one of the highest in the industry. SBI provided Rs 10,993 crore against bad loans, 50% higher than in the previous quarter. It also has a counter-cyclical provisioning of Rs 1,100 crore and another Rs 5,900 crore towards standard assets in stressed sectors, which is over and above the PCR.
The slippage from the watch list to the NPA category during 2016-17 was about 72% and the bank expects a similar kind of slippage during the year, with many watch list loans slipping into NPA unless resolutions take place. So the high provisions will take care of this slippage. High provisions also speed up the resolution process and check the losses of the bank during the year as it begins to report its financials as the merged entity from fiscal 2018.
"We have kept the provisions very high so that even if any account slips during the year we have adequate cover to take care of the losses," Khara said.
...& ANALYSIS
- Post the merger, the watch list of the merged entity zoomed to Rs 32,427 crore
- Highest additions to the watch list from the associate banks came from the power sector
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "SBI")
)
Dinesh Khara, managing director, associates and subsidiaries, SBI, told DNA Money, "Subsidiaries had exposures to the state electricity boards (SEBs), which got added to the watch list. Iron & steel and construction sector accounts were found to have stress, so we have put them on the watch list and provided for these accounts."
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}