SBI numbers show promise but worst is not over for public sector banks

FP Dinesh Unnikrishnan15 Nov 2014

State Bank of India (SBI), the country’s largest lender, on Friday came out with decent numbers in the September quarter. The most critical factor in SBI’s earnings is steady decline in fresh slippages and health recovery.Gross non-performing assets (NPA) of the lender, during the quarter, have come down to 4.89 percent of its total loan book from 4.9 percent in the preceding quarter.

Thus, SBI’s bad loans have come down by a total of 84 basis points (bps) since the third quarter of last fiscal from 5.73 percent to 4.89 percent. One bps is one hundredth of a percentage point.

Net NPAs, after adjusting provisions, too have declined to 2.73 percent from 2.91 percent compared with the year-ago quarter even though have gone up marginally from the preceding quarter.

In the last one year, SBI has attempted to get a firm hold on the bad loan scenario by identifying the problematic areas and intensifying the fight against wilful defaulters, borrowers who do not pay back even if they have the capacity to do so.

The biggest pain on SBI’s book emerged from the mid-sized corporate segment and agriculture, which continued to be significant contributors to bad loans this quarter. But the bank has clearly managed to address the stressed asset situation as reflected in the quarter numbers.

The net profit at Rs 3,100 crore has beaten the estimates of analysts polled by CNBC at Rs 3,096 crore. The improvement in the net interest income to Rs 13,275 crore, up 8.4 percent, from Rs 12,251 crore in the corresponding period last year, has aided the 30 percent jump in the profit on a year-on-year basis.

SBI’s other income, which includes the treasury income, too have grown by 39 percent to Rs 4,571 crore from Rs 3,278 crore in the year-ago period.

Loan growth has been robust for the bank with its advances growing by 9.7% on year, which, in turn, helped the lender to manage strong growth in Interest income.

Total provisions, during the quarter stood at Rs 4,275 crore of which Rs 4,028 crore was set aside for bad loans.

That said, the numbers announced by other state-run banks such as Punjab National Bank and Indian Bank of India, reiterate the belief that the banking sector, dominated by government banks, is yet to come past the worst as far as bad loan situation is concerned.

Gross NPAs of total 40-listed Indian banks have grown by 17.5 per cent in the September quarter to Rs 2,68,933 crore from Rs 2,28,895 crore in the year-ago quarter and up by 7 percent compared with Rs 2,51,962 crore in the June quarter. But the pace of increase in bad loan generation has surely come down.

Of the total bad loans, almost 90 percent comes from state-run banks.

Bad loans are only one segment of the total stressed assets in the banking system. The other chunk is the restructured loans, which constitute almost double to the declared gross NPAs in the banking system.

Together, stressed assets constitute 13-14 percent of the total loans given by banks, while bad loan generation remained modest in private banks.

There are at least 10 banks in the Indian banking system, which have Gross NPAs above 5 percent of their total loans. Topping the list are state-run banks such as United Bank of India and Indian Overseas Bank.

As Firstbiz has noted earlier, the seeming economic revival is yet to show on the ground as reflected in the muted credit growth of banks largely due to the absence of new project proposals.

Unless the positive sentiments post the arrival of the Narendra Modi government at the Centre translates into investments and real economic activity on the ground, banking sector will not be freed from the ills of NPAs.

But the long-term solution lies in freeing state-run banks from the control of the government. These banks must be prepared to find sufficient capital to survive on their own instead of the current practice of annual capital infusion through budget allocation.

Going ahead, the government will find it extremely difficult to meet the rising capital requirement of state-run banks unless it is willing to reduce holding in these banks.

Also, shorter tenures of top executives and frequent intervention from politicians in the business decisions of government banks have only helped to add to their incompetence of sarkari banks before deep-pocketed tech-savvy rivals in private sector.

SBI Chief Tries to Shift the Blame on NPAs

Money control :DEBASHIS BASU | 17/10/2014 04:43 PM |   

Blames lax regulations for high NPAs when the real cause is widespread corruption in public sector banks

The State Bank of India (SBI) chairperson Arundhati Bhattacharya, in an interview with Financial Times, has called for shake up in the regulatory system, as if SBI and its chairman is an outside to the same system.

In the interview, the SBI chief admitted that rates of bad and restructured assets will keep rising for “at least a couple more quarters”, despite having already hit roughly 10% of loans. 

But remarkably for the first time for a chairman of a government-owned bank, she has argued that India needs tougher rules for defaulters, as well as “a proper bankruptcy law to help get orderly resolution of [bad] assets”. “What we need is a little more teeth,” she was quoted while calling for firmer regulations to target indebted tycoons. 

There are three things to note about this new, sudden demand for teeth. 

1. No chairman of state-run lender has ever raised his or her voice about poor regulations that is failing to curb the ever-rising non-performing assets (NPAs).

2. SBI and other banks have never targeted defaulting corporate borrowers with determination to recover monies. Indian borrowers have always felt safe borrowing from the public sector banks knowing fully well that chairmen of these banks have no accountability. 

3. In fact, successive bank chairperson have passed the buck to the next person and retired with full benefits, even as defaults continued to hit the government-owned banks at every economic downturn.

4. The demand for “more teeth” is coming from the State Bank of India but not private sector banks because these banks have negligible bad debts.

5. This merely proves that it is not the recovery laws but lax credit appraisal and totally compromised top management is responsible for abnormally high bad debts in government banks.

Indeed, the same corrupt nexus between public sector banks and it's defaulting borrowers was responsible for band loans reaching 13% of advances in 2001-2002. In response, the government had created Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002 designed to help in the recoveries of bad loans. One of the key provisions of the Act is for banks to be able to auction the assets of defaulting borrowers. This law was supposed to wholly aid banks. 

Unfortunately, if the bank officials are corrupt and have lent money without adequate collateral, what auctions will they do? This is why spectacular defaults such as Deccan Chronicle and Kingfisher Airlines have led to no action against defaulters, despite the SARFAESI Act. In addition, SBI has been the biggest lender to Kingfisher. Have you heard of any action against any SBI official, including previous chairman, for what is obviously gross negligence in assessing Kingfisher’s creditworthiness and for not ensuring that the bank’s interests are covered?

In May, the All India Bank Employees' Association (AIBEA), while revealing wilful defaults worth Rs70,300 crore in 400 loan accounts in public sector banks (PSBs), has demanded a detailed probe in to the loan sanctioning and loans turning into bad assets. 

This is bad lending of epidemic proportions. If banks were not confident of the laws that would land them in this huge soup of bad loans, whom did they point this out to and why did they lend? No, these bad loans have only one root: corruption, something that Ms Bhattacharya does not want to talk about.

According to the bank employee's union, over the past seven years, there were fresh bad loans worth Rs4.95 lakh crore only in government banks, while during the same period, these lenders wrote off bad debts worth Rs1.4 lakh crore. Gross non-performing assets (NPAs) and bad loans in the PSBs have increased to Rs1.64 lakh crore as on 31 March 2013 from Rs39,000 crore as on 31 March 2008.

While the unions were demanding stern action against bank defaulters, not a single bank chairman supported it. Moneylife had asked the SBI chief three questions based on her FT interview. The questions were, did not SBI know that the laws were weak; did banks ever tell the RBI or the Finance Ministry about the problems and is SBI saying that the RBI has failed to act like responsible regulator?

Her office replied: "(the) Chairman in her interview had merely emphasized the need for tougher resolution mechanism to put a check on wilful defaulters. Additionally, she also said banks should work in tandem and more closely in consortiums, while lending only to projects that have government regulatory clearances in hand." It also said, "...to draw a link between the 3 questions that you have posed and the relevant interview is far-fetched."

The bank employee unions have been demanding fix responsibility on banks’ top brass for the loans that have turned bad, allow banks to share information on NPAs and wilful defaulters under the Right to Information (RTI) Act, and declare wilful loan default as a criminal offence. 

The fact is despite stringent credit appraisal process and committees to sanction loans, borrowers have siphoned off money from the banking system in connivance with bankers. Once this reaches large proportions that affect the functioning of the banks, the ministry of finance quietly steps in and washes the sins of the banks by recapitalizing them, even as chairman after chairman go scot free.

There is a reason for this perpetual lack of accountability of senior bank officials. Some chairmen are handpicked by ministry and finance minister for their ability to be pliant and sanction dirty loans. The Reserve Bank merely rubber-stamps this selection process. Who will go after the chairman when the MoF is involved and the RBI is hand-off? This is the root of bad loans in India, not lax regulations that Ms Bhattacharya tries to blame

Trouble mounts for Vijay Mallya: Now SBI slaps wilful defaulter notice on KFA

PTI  Sep 10,2014

Mumbai - Days after United Bank of India declared Kingfisher Airlines, promoter Vijay Mallya and three other directors wilful defaulters, the country's largest bank State Bank of India (SBI) today said it has also sent a notice to tag them as "wilful defaulters".

"We have already sent a notice to KFA (to declare it as wilful defaulter). There is a mandatory time that needs to be given to them to respond and that time is currently on," said Arundhati Bhattacharya, Chairperson of SBI.

SBI, which is the lead bank of a lender consortium to the crippled carrier, has an exposure of over Rs 1,600 crore.

The airline owes Rs 7,600 crore to 17 banks. In February 2012, the banks had formally declared loan recall on KFA and began recovery process.

So far, they have recovered around Rs 2,000 crore by selling pledged shares. They are now working on selling two other pledged properties - Kingfisher Villa in Goa and Kingfisher House in Mumbai.

Already, United Bank of India has won a legal backing on its decision to declare Mallya and other top executives of the airline as wilful defaulters. State-run PNB and IDBI Bank, and private lenders Federal Bank and Axis Bank are also in the process of doing the same.

PNB, which has around Rs 800 crore to recover from the airline, and wants to tag the company as a wilful defaulter, has approached a Division Bench of Delhi High Court to stay a single Judge order that has allowed Mallya to send his lawyers to present his case.

According to banking norms, a defaulting borrower has to be personally present in the bank that seeks to declare him /her as wilful defaulter and can't be represented through lawyers. Citing the same, the Calcutta High Court upheld United Bank's decision on Mallya.

Asked about why SBI, the consortium leader that has the largest exposure to the airline, has been silent on the issue, she said, "Whatever is required to be done is being done. The process is already on but we don't want to talk about any particular account in public as we would prefer working silently."

Meanwhile, debt-ridden Kingfisher Airlines yesterday contested UBI's decision to declare it as a wilful defaulter, saying that RBI guidelines in this regard do not apply to the company.

"Where they need to be stopped, we have done everything. If a regulator, whether Sebi or RBI, needs to know they all know everything," Bhattacharya told PTI in an interview here.

She said banks have to follow processes to defend themselves in case Kingfisher goes to court. "We have to be very sure ourselves that we can stand in a court of law in case he goes to court, and defend our action."

Calling for better recovery mechanism backed by law and not just by RBI norms, Bhattacharya said India needs a bankruptcy law.

"I personally believe we need much stronger laws for recovery and much better bankruptcy laws. The laws which we have at present are falling short of the requirement.

"The wilful defaulter tag is in RBI regulation but the force of law is not with it. So, you need a legal mandate there," Bhattacharya, who is completing her first year as the 208-year-old bank's first woman chief, said.

Asked why don't banks bunch all cases against KFA into a superior court, she said "It is being bundled as single case on behalf of the consortium. But declaring a borrower as a wilful defaulter can be done only by individual banks and not the consortium. This is legal requirement."

Kingfisher, which stopped flying since October 2012, owes as much as Rs 7,600 crore in principal and interest accrued since January 2012 to 17 banks. Among them, Punjab National Bank and IDBI Bank have Rs 800 crore exposure each.

Besides, Bank of India has Rs 650 crore lent to the airline, followed by Bank of Baroda Rs 550 crore, United Bank of India (Rs 430 crore), Central Bank of India (Rs 410 crore), Uco Bank (Rs 320 crore), Corporation Bank (Rs 310 crore), State Bank of Mysore, (Rs 150 crore), Indian Overseas Bank (Rs 140 crore), Federal Bank (Rs 90 crore), Punjab & Sind Bank (Rs 60 crore) and Axis Bank (Rs 50 crore).

According to RBI norms, a wilful defaulter is a person/company who deliberately doesn't honour debt commitments to lenders. Once branded a wilful defaulter, a person or entity cannot access institutional credit. Such a person cannot hold office of director.

PTI

Syndicate Bank scam :Banks ask Bhushan to sell & lease back critical assets

Manojit Saha  |  Mumbai  August 20, 2014 

A day after effectively taking charge of Bhushan Steel, lendershave delivered another punch. The bankers’ consortium, which met in New Delhi on Monday, has asked the troubled steel maker to sell and lease back some of its critical assets to reduce debt, as the borrower is finding it difficult to raise equity from the market.

This is part of the road map drawn by SBI Caps, the merchant banking arm of State Bank of India (SBI), for recovery of around Rs 40,000 crore that Bhushan Steel has borrowed from 35 lenders.

According to the plan, the steel company has been asked to deleverage by repaying debt. However, given the company’s present problems that led to a slide in its share price, raising equity through a qualified institutional placement was not a viable proposition at this point, a banker who attended Monday’s meeting told Business Standard.

THE STORY SO FAR

AUGUST 2 CBI arrests Syndicate Bank’s chief, S K Jain, over graft charges AUGUST 7 CBI arrests Bhushan Steel Vice-Chairman & Managing Director Neeraj Singal for allegedly bribing Jain AUGUST 8 SBI Chairman Arundhati Bhattacharya says an external agency will be appointed to monitor day-to-day operations of Bhushan Steel. AUGUST 18 Lenders decide to go for forensic audit; say they will nominate three members on the company’s board

The share price of Bhushan Steel has fallen 62 per cent since August 5. The shares closed at Rs 144.90 apiece on Tuesday.

Bankers said four assets, including a coke oven plant, had been identified by the steel company. It is not immediately known how much debt will be reduced through the sale and lease-back.

According to bankers, there is no dearth of buyers for the company’s facilities and SBI Caps is in the process of identifying prospective bidders, which might include global steel producers.

Banks have tightened their grip on the firm since its vice-chairman & managing director, Neeraj Singal, was arrested by the Central Bureau of Investigation on August 7 for allegedly bribing SK Jain, the now-suspended chairman & managing director of Syndicate Bank.

Bankers said the forensic audit, as decided by the consortium on Monday, would be done by an external agency and would seek to find out if the firm diverted the borrowed funds or used those for purposes other than those for which the loans were given.

It would also find out whether there was creation of genuine assets.

These steps were taken even as the loans continue to be standard on the books of banks and have not become non-performing. However, following the liquidity problem that Bhushan Steel, one of the most indebted steel makers of the country, is facing, the loan is now categorised as special mention account 2 that is overdue in 60 days.

A concurrent auditor will also be appointed to monitor cash flows on a daily basis and an independent engineer will look at the operations of the company.

“Given the magnitude of the exposure and the number of lenders involved, banks will take a huge hit if the loan turns bad,” said a senior executive of a public-sector bank.

Maximum customer grievances against SBI: ombudsman

B L :CHENNAI, JULY 22: 2014 

Complaints rise following improved awareness

State Bank of India leads public sector banks in number customer complaints received by the Banking Ombudsman during the year 2013-14.

SBI, with 1,960 complaints from customers, is followed by Indian Bank with 910 and Indian Overseas Bank with 740.

Among the private sector banks, ICICI Bank with 682 complaints is on top of the list, followed by HDFC Bank (560 ), Standard Chartered Bank (440) and Axis Bank (326).

Announcing this at a press conference here, U. Chiranjeevi, Banking Ombudsman (Tamil Nadu, Puducherry and Andaman and Nicobar Islands), said due to improved awareness among consumers the total number of complaints received in his region has gone up by 21 per cent during the year 2013-14.

He said 8,775 complaints were received during the year against 7,255 last year. “And, close to 7,000 of them were maintainable, excluding the 241 complaints, which are under process,” he said.

According to him, more than 97 per cent of them were disposed. Majority (21.93 per cent) of the complaints received during the year were about lapses in the process of loans and advances.

This is followed by complaints about debit cards, credit cards and ATM related issues (21.73 per cent)

SBI to act on loans to firm tied to Congress minister

PCL has defaulted on about Rs.70 crore of loans advanced by SBI in 2011-12 that have been classified as non-performing assets. About Rs.43 crore of that is fund-based exposure and the rest is in the form of guarantees. Photo: Mint

Live Mint ; Dinesh unnikrishnan  Mar 21,2014

PCL, founded by textile minister Kavuri Samba Siva Rao and headed by his daughter, owes Rs350 crore to creditors

Mumbai: State Bank of India (SBI), the nation’s largest lender by assets, is planning to take action to recover money owed by a construction firm linked to a senior Congress party politician and Union minister, signalling the seriousness with which banks are taking central bank and government warnings to curb bad loans.

Hyderabad-based Progressive Constructions Ltd (PCL), a company founded by textile minister Kavuri Samba Siva Rao and headed by his daughter Srivani Mullapudi, owes about Rs.350 crore to SBI and other creditors, mainly state-run banks.

PCL has defaulted on about Rs.70 crore of loans advanced by SBI in 2011-12 that have been classified as non-performing assets. About Rs.43 crore of that is fund-based exposure and the rest is in the form of guarantees.

Other banks owed money by the company include Andhra Bank, with Rs.149 crore of exposure, Corporation Bank (Rs.47 crore) and Allahabad Bank (Rs.42 crore), according to data with the All India Bank Employees Association (AIBEA). The association said it sourced the numbers from these banks.

Employee unions at the banks have now written to the Election Commission about PCL’s bad loan problems, ahead of the April-May general election, according to C.H. Venkatachalam, general secretary of AIBEA.

The company “has secured loans from various state-run banks over years using obvious political influence”, Venkatachalam said. Mint couldn’t independently ascertain this.

SBI could seek legal recourse to recover the money, a senior executive at the bank said, requesting anonymity on grounds that the matter is sensitive in nature.

“We have asked for viability study of the company, which is not done yet. We are now planning to take whatever action possible to recover the money including approaching courts,” this person said.

Both the Reserve Bank of India (RBI) and the Congress-led United Progressive Alliance government have been pushing state-run banks to reduce a pile of bad loans by taking strict action against defaulters.

Gross non-performing assets (NPAs) of 40 listed Indian banks rose 36% toRs.2.43 trillion as of December-end from Rs.1.79 trillion in the year-ago period.

About Rs.4 trillion of loans are being recast by banks both through the so-called corporate debt restructuring mechanism, which involves lenders writing off some debt and rolling over some more, and on a bilateral basis between individual banks and borrowers.

“If we sit on these restructured assets without closer monitoring and action, we will see further erosion in value. And that we need to combat,” RBI governor Raghuram Rajan said in an 8 October interview with Mint.

“We cannot have an affluent promoter and a sick company,” finance ministerP. Chidambaram said in March last year.

To be sure, many companies, especially infrastructure firms, are struggling to repay loans. Slower economic growth, high interest rates and delayed projects have impaired the ability of many borrowers to service debt, burdening banks with non-performing assets.

“There has been over-leveraging in the infrastructure sector in the recent years due to high growth expectation in the economy, which didn’t happen,” said Ananda Bhoumik, a senior director at India Ratings and Research Pvt. Ltd. “Also, various clearance delays have impacted the cash flows of these firms.”

Banks are starting to crack down on defaulters.

“Banks have become very stringent in terms of recovery of bad loans no matter how big or how small the company is,” said Abhishek Kothari, an analyst at Networth Stock Broking Ltd. “Especially, in the case of SBI, the bank has really quickened the process of recovery, using all possible options.”

In the case of PCL, invoking the guarantees submitted by the firm is one option, the SBI official cited above said. SBI has stayed out of a loan restructuring exercise that other lenders with exposure to PCL offered the company in 2012-2013 because the bank was concerned about its future viability, the official said.

The loans were meant for various projects planned by PCL, some of which didn’t take off eventually, the banker said. They have either turned bad (between June 2008 and September 2013) or are being recast, he said.

Email queries sent to Andhra Bank, Corporation Bank and Allahabad Bank on Tuesday evening hadn’t been answered as of press time on Thursday.

An email sent to PCL on Tuesday seeking details of its bank loans also did not elicit a response.

Samba Siva Rao, a member of Parliament from Eluru in Andhra Pradesh, said over the telephone on Wednesday that he did not hold any official position in the company now.

“There could be some issues (with the company in connection with bank loan exposure),” he admitted.

While the government has asked state-run banks to speed up bad loan recoveries, what happens when a firm linked to a Union minister has Rs350 crore in bad debt? Mint’s Dinesh Unnikrishnan has more

According to the SBI official cited earlier, Samba Siva Rao is still a guarantor for the company. Mint couldn’t independently verify this.

According to the banker, PCL had been drawing advance amounts on construction projects, which couldn’t be executed within the specified timeframe, resulting in cost overruns.

“The company was borrowing beyond its capacity and couldn’t pay back since many projects, for which money was advanced, didn’t take off.,” said the official.

Rao is also a shareholder in PCL.

Going by the declaration of assets and liabilities by members of the Lok Sabha, as of 31 March, Samba Siva Rao had 12.9 million equity shares in PCL, which works out to 41% of the total shares of the company (31.6 million), according to data sourced from Capitaline, a corporate database.

The paid-up equity capital number is as of 2007. Later data is not available on the company which, according to its website, started as a partnership firm in 1966 and is engaged in the construction of dams, powerhouses, barrages, roads, tunnels, and industrial, commercial and residential structures.

There are no details on the website of the Registrar of Companies on PCL.

According to the latest available details on the company’s website, which doesn’t have Samba Siva Rao’s name on it now, PCL posted a gross profit ofRs.220.6 crore for the year 2007-2008, compared with Rs.153.6 crore in 2006-2007.

In November, PCL was barred by the World Bank from being awarded any contract for any project financed by it for a minimum period of 11 years for violating its ‘fraud and corruption policy’.

According to a 29 November PTI report, World Bank took action against PCL for engaging in “fraudulent practices” in the execution of three contracts for a National Highway project. PCL was found to have “engaged in sanctionable practices” in connection with the Lucknow-Muzaffarpur National Highway project in Uttar Pradesh, the report said.

SBI to Sell Rs 5,000 Crore NPAs to ARCs Shortly

By ENS Economic Bureau - MUMBAI: 18th March 2014

The country’s largest bank, the State Bank of India became the latest to join the bandwagon of banks hawking distressed assets in a bid to strengthen their balance sheets and dispose of non-performing loans from their books.

According to reports quoting a senior SBI official, the bank will put Rs 5,000 crore out of nearly 70,000 crore of distressed loans up for auction before March 31. This follows other banks like United Bank of India which have also decided to rid themselves of non-performing loans after reporting gross non performing assets (NPA)  equalling 10.82% of advances and a loss of Rs 1,238.08 crore for the December 2013 quarter. When contacted, a State Bank of India spokesperson refused to confirm or deny whether they were putting Rs 5,000 crore of assets on the block in this quarter.

The urgency to dispose of these assets comes as the Reserve Bank of India’s (RBI) new guidelines on provisioning for non-performing loans come into effect from April 1, 2014. According to the new guidelines introduced by the RBI last month and notified last week, banks are incentivised to recognise and dispose of NPAs early.

Non banking finance companies (NBFCs) and private equity are permitted to participate in the auction process. Rating firm ICRA noted that, “the RBI framework is expected to strengthen banks’ monitoring process and joint efforts for resolution and recovery. It could have a positive impact on their asset quality over the medium to long term.”

ICRA, which is partly owned by Moody’s Investor Services, said in a report recently that the banking sector will continue to be under stress on account of bad loans.

“Overall, gross non-performing assets (Gross NPAs) for public plus private banks increased from 4.0% as on September 30, 2013 to 4.1% as on December 31, 2013. The deterioration was primarily because of the slippages posted by the public sector banks, for whom the gross NPA percentage increased from 4.5% as in September 2013 to 4.7% as in December 2013,” ICRA noted.

More and more banks are joining the queue to unload non-performing loans. It was reported last week that United Bank plans to dispose of around Rs 700 crore in NPAs to asset reconstruction companies. Chennai-based Indian Bank also invited bids for “18 individual NPAs” through newspaper advertisements recently.

Arundhati Bhattacharya underlines tech in SBI's war on non-performing assets

Wednesday, Oct 9, 2013, 8:14 IST | Place: Mumbai | Agency: DNA

Nupur Anand

Arundhati Bhattacharya, the new chairperson of State Bank of India, is all set to intensify the war on non-performing assets (NPAs) in the coming quarters.

“We are going to make sure that the intensity is much, much more,” she said in her first media conference as SBI head on Tuesday.

To improve NPA management, SBI will employ more tools than before, with emphasis on effective use of IT.

Bhattacharya said IT is going to be used in risk mitigation, product pricing, customer-related issues and in raising productivity. The bank will also ramp up technology to tackle loan recovery.
Focus will also be on structure rationalistaion and improved time resolution to fight bad loans.
“We will also be looking at rationalising NPAs’ structure, as to how it is managed and who exactly takes them on and at what stage, to ensure we get much better and quicker responses. We will also look at seeing how we can cut down the time span that we normally go through in resolving NPAs,” she said.

SBI’s net NPAs, which were at 1.79% of its net advances in 2008-09, have risen to 2.10% in 2012-13. In the April-June quarter, gross NPAs rose to 5.56 %.

Besides tackling NPAs, IT is going to be used aggressively in several other SBI functions. SBI is currently implementing a digital platform and wants to make it bigger and better in the coming days.
Another priority for Pratip Chaudhuri’s successor is believed to be the much-talked-about merger of SBI’s associates State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Mysore and State Bank of Patiala with the parent.

However, Bhattacharya believes that any such merger is unlikely any time soon, considering that only five months are left in this financial year. But it is possible that the merger process may well start this fiscal, she said.

  

Sai Info CMD ‘siphoned off Rs 40 cr’ before he went ‘missing’, say staff in plaint

Sunil Kakkad, Chairman and Managing Director, Sai Infosystems

BL :  Ahmadabad :Virendra Pandit :September 19, 2013

With a Satyam-like saga slowly unfolding in Gujarat’s top IT company 

Sai Infosystems (India) Ltd, senior officials of the Rs 2,000-crore firm 

have complained to the Ahmedabad Police’s Crime Branch that 

Sunil Kakkad, Chairman and Managing Director, 

had allegedly siphoned off nearly Rs 40 crore 

in 12 days just before he went “missing” on June 28, 2013, along with his family.

Amit Mathur, Associate Vice-President, and Sangeet Nigam, Senior Vice- President, in a written 14-page complaint accompanied by 56 documents, charged Kakkad, his brother and director Sameer Kakkad, Prem Behl, also a director, and Baageshree Bhupen Savani, Senior Manager and PA to CMD of wrongdoings. Mathur personally handed over the complaint to the Joint Commissioner of Police, Crime Branch, on September 10.

The officials and employees, many of whom had quit but could not find work due to the current market conditions, finally met V.K. Saxena, President of an NGO, National Council for Civil Liberties, to take up cudgels on their behalf.

Fudging, fabricating accounts

The complaint, besides raising the issue of non-payment of salary to the 1,400 employees of Sai Infosystems, accused these persons and Mihir Jitendra Patel, Personal Finance Consultant, in collusion with their auditors, of “fudging” and creating fabricated accounts by reflecting a “very rosy” picture of the company. On this basis, they managed to procure contracts from the Governments of Maharashtra, Gujarat and Madhya Pradesh.

According to the complainants, the audited balance sheets for the last two fiscal years were “manipulated” to reflect huge profits and to “defraud the employees, bankers, creditors, vendors and government-owned companies”.

Crores transferred

Between June 14 and 24, that is, just before “absconding” on June 28, Kakkad “transferred” approximately Rs 27.83 crore, from Sai Info account with State Bank of India, Ahmedabad, to his various group companies, Mathur and Nigam alleged, while furnishing the list of the amounts transferred. These amounts were transferred to the firms named Tanya, Swan, Power Info, Cameo, and Blue Eye.

Further, Kakkad, on June 26, also transferred Rs 10 crore from his another group company, Click Telecom Pvt Ltd, to a third group company Power Info, and Rs 2 crore from the account of his another group company Atrium InfoComm Pvt Ltd, to Power Info-Control & Services Pvt Ltd. Copies of transfer advice signed by Sunil Kakkad were attached with the complaint.

Besides, according to the complaint, Kakkad set up SIS Global (USA), INC, in Oak Brook, Illinois, SIS Global (FZE) in UAE and Kompac Technologies Ltd, Hong Kong.

Investments

The company’s balance sheet for the year ended March 31, 2013, showed that it had invested Rs 11.33 crore to purchase equity instruments, government securities and in mutual funds. It bought shares worth Rs 7.50 crore in Atrium Infocomm Pvt Ltd, Rs 1.41 crore in SIS Global(FZE), UAE and Rs 4.46 lakh in SIS Global (USA), Inc, all subsidiary companies of Kakkad .

Requesting the Crime Branch to register a criminal case under various sections, Mathur and Nigam have said the bank accounts of the subsidiary companies, too, be frozen. They have also sent copies of the complaint to the Chief Minister, CBI, Income Tax and Provident Fund departments.

SBI notice in dailies

Earlier, SBI had, in a public notice published in various dailies said: “The CMD of SIS Group… Shri Sunil S. Kakkad, is not contactable and is reported to be missing.” SBI, which heads a consortium of banks that have, according to sources, lent Rs 1,000-1,200 crore to SIS, warned people against dealing with the assets of SIS and its associate companies.

The SBI notice mentioned the assets of two companies, including immovable properties charged/mortgaged to the consortium as security for the various credit facilities granted. The firms were: Click Telecom Pvt Ltd (associate of SIS), with its registered office at Nariman Point, Mumbai, and Attrium Infocomm Pvt Ltd (a subsidiary of SIS), with its office at Bodakdev, Ahmedabad. Kakkad was a director in both these companies as on March 31, 2013.

Properties mortgaged

Kakkad and Sai Infosystems had reportedly mortgaged 14 properties, including eight in Gujarat, on which SBI has claimed first right. The securities charged to the banks included all the current assets owned by these two companies in Ahmedabad, Hyderabad, Bangalore, Kolkata, Cherthala and Parwanoo, all the receivables, plant and machinery and other fixed assets at these places, and immovable properties in Ahmedabad, Gandhinagar and other places.

Founded in 1992 by Kakkad, an electronics and communications engineer and a first generation entrepreneur, Sai Info had emerged as one of the fastest growing end-to-end ICT solutions providers and system integrators. It had also diversified into hardware manufacturing, software development and telecom services. SIS had, in the last couple of years launched, in a tie-up with BSNL, a video calling facility from PCOs, said to be India’s first “see phone”.

The company’s revenues had zoomed four times to Rs 1,500 crore in 2010-11 from Rs 350 crore in 2006-07. It was allegedly facing financial crunch since August 2012 despite having an order book of over Rs 2,500 crore.

The sudden ‘collapse’ of a seemingly robust company, whose hoardings asking the vehicle drivers to be careful, “Mobile Off, Seatbelts On,” can still be seen on the Ahmedabad-Gandhinagar Highway, had caught many by surprise.