SBI chief says new NPA norms will have minimal impact

BL : PTI : 5 June 2013

State Bank of India today said it will have less than 1 per cent impact on its pre-tax balance sheet or around Rs 200 crore annually due to the revised norms on NPAs and restructuring by the RBI.

“Total impact will be around Rs 200 crore a year which will be less than 1 per cent on a PBT (profit before tax) basis,” Chairman Pratip Chaudhuri told reporters on the sidelines of an international banking summit organised by the industry lobby IMC here.

On May 19, the central bank revised the norms on restructuring and NPA accounts, increasing the provisioning percentage on restructured accounts besides making loan recasts tougher by increasing promoters contribution.

Under the new rules, from June 1, banks must set aside provisioning for 5 per cent of the value of a loan that is newly restructured, from 2 per cent previously.

But the regulator said it will not force banks to re-classify loans as NPAs in the event of project delays in the infrastructure and commercial real estate sectors.

To discourage loan recasts, which has more than doubled last fiscal, the RBI had said from April 2015 an account will have to be classified as sub-standard as soon as it is restructured and a standard asset on restructuring would be immediately classified as sub-standard as also non-performing assets.

“All restructured accounts which have been classified as NPAs upon restructuring, would be eligible for upgrade to the standard category after observation of ‘satisfactory performance’ during the ‘specified period’,” the RBI had said.

According to ICRA, banks may have to keep an additional Rs 1,500-2,500 crore as provisions this fiscal for their existing recast loan book.

On the possible impact of reducing deposit rates on retail rates, Chaudhuri said it would depend on what competitors are offering on other instruments.

He also said despite reducing rates on bulk deposits in the recent past, such a possibility on retail rates seems to be remote.

Referring to credit growth in first two months of the current fiscal, Chaudhuri said, “the first half is generally slow. So, it will be unrealistic if we expect higher growth.

We are taking deposits because we think growth will happen in the second half. Growth today is coming from the consumer side.”

On Kingfisher Airlines, Chaudhuri said it will not be possible on his part to comment on a specific account.

He also said it is worrisome to see stagnancy in the industrial sector.

(This article was published on June 5, 2013)

Keywords: RBI, SBI, bad loans, NPA provisioning, restructuring of loans, Reserve Bank of India,