SBI sees rush hour in corporate debt recast

State Bank of India (SBI) sees more and more companies seeking corporate debt restructuring (CDR) in days ahead, with the slowdown affecting businesses and thereby impacting their debt repayments.

“SBI has seen a substantial growth in the number of customers in the last few months compared to the same period last year. Corporates keen on availing of the CDR package are from across the sectors that include agro-based industries, automobile ancillaries and textiles, among others,” said A Krishna Kumar, SBI’s managing director.

However, he has refused to quantify the CDRs in view of the closure of the quarter.

According to him, the IDBI-led consortium is now examining several such CDR requests. While some of the CDRs are sector-specific, others are due to the general downturn in the system.

Meanwhile, the bank is witnessing a slump in the credit offtake by corporates, with many of them expecting a rate cut in the near future. According to Kumar, though corporates have been sanctioned loans, these lie undisbursed as borrowers are in a wait and watch mode. “We have a number of sanctions on hand, but disbursement has not taken place. The corporates are largely waiting for the interest rates to soften from the current level,” he said.

Though the credit growth for the overall industry has fallen, SBI has seen over 16% growth in the December quarter. As the fourth quarter normally sees substantial growth in credit offtake compared with the previous three quarters, SBI hopes to end the current fiscal with an overall credit growth of around 18%. It expects to maintain a robust net interest margin (NIM) of over 3.5% during the fiscal. “We are expecting a credit growth of 17-18% and deposit growth of about 20%,” said Krishna Kumar.

According to him, the bank has still not decided on tinkering with interest rates on savings banks though these stand deregulated now. Talking about exposure in terms of its loan book, aviation is being seen as a key sector in affecting its balance sheet. Kingfisher in particular has already been declared an NPA by the bank and it would make required provisions - to the extent of about 20% - in its accounts for the third quarter. “The airlines are too huge and too large to come under the CDR mechanism. As far as SBI is concerned, the account of Kingfisher has been declared a non-performing asset. The entire consortium of lenders is now in talks with the airlines industry, especially Kingfisher, on how to solve the problem,” he said.

Admitting that the crisis in the airlines industry will reflect in the books of the bank as NPAs, he said, “We should not have too much of a problem in the December balancesheet as compared to September.”

Interestingly, despite the slowdown, demand for CDRs and large accounts such as Kingfisher turning into NPA, the bank is not worried about the growth in its NPA portfolio for the quarter.

According to Kumar, the NPAs of the bank for the quarter ended December 2011 would be less than expected. “Due to certain initiatives that were put in place, the NPAs are not going to be as bad as we had expected. Appointing officials of DGM rank above the regional managers for monitoring and recovering NPAs and deployment of dedicated recovery teams with officers and supporting staff to constantly track and pursue NPA accounts are helping in reducing the NPAs. We are developing internal teams to track the NPAs and reducing the dependence on outside agencies for managing the NPAs,” he said.