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State Bank of India expects about 3 per cent of its total restructured loan portfolio of Rs 36,904 crore to slip into the loss category.
What this means is that the bank will have to make 100 per cent provisioning for loans aggregating about Rs 1,100 crore. Recovery of loans in the loss category takes a long time as this entails liquidating the collateral.
According to SBI Chairman Pratip Chaudhuri, given the tough economic environment, about 20 per cent of the restructured book eventually turns into non-performing assets (NPA). Of the total restructured loan portfolio, about Rs 7,373 crore has turned NPA. This is a mix of recent and past restructuring.
What this means is that the bank will have to make 100 per cent provisioning for loans aggregating about Rs 1,100 crore. Recovery of loans in the loss category takes a long time as this entails liquidating the collateral.
According to SBI Chairman Pratip Chaudhuri, given the tough economic environment, about 20 per cent of the restructured book eventually turns into non-performing assets (NPA). Of the total restructured loan portfolio, about Rs 7,373 crore has turned NPA. This is a mix of recent and past restructuring.
Potential damage
“We think the eventual loss on the total restructured book will be to the extent of 3 per cent of the book (Rs 1,000-1,100 crore). That is the potential damage or loss we expect on the restructured portfolio,” said the SBI chief.
India’s largest bank restructured accounts worth Rs 564 crore in the April-June quarter. It also sees loans aggregating about Rs 3,000 crore coming up for restructuring in the current quarter. This includes backlog from the first quarter and cases referred by the bank to the corporate debt restructuring (CDR) cell.
The Mumbai-based bank made a provision of Rs 2,790 crore ( against Rs 2,782 crore in Q1 FY12) to cover potential loan losses in the April-June quarter. Banks refer certain accounts in their lending portfolio to a special cell known as CDR cell when a particular company is going through a temporary rough patch. This entails modification of original contractual terms to provide for concessions of interest, or principal, or for an extension in maturity period.
For the quarter ended June 30, 2012, the bank’s gross NPA and net NPA sequentially increased by about Rs 7,500 crore and Rs 4,500 crore, respectively.
In April-June, gross NPA ratio increased to 4.99 per cent (from 4.44 per cent in March, 2012) and net NPA ratio increased to 2.22 per cent (from 1.82 per cent in March 2012).
“NPAs have been a bit of an aberration for the bank,” said Chaudhuri.
NPAs in the April-June quarter came mainly from a power company, a highway construction company and a pharmaceutical company.
India’s largest bank restructured accounts worth Rs 564 crore in the April-June quarter. It also sees loans aggregating about Rs 3,000 crore coming up for restructuring in the current quarter. This includes backlog from the first quarter and cases referred by the bank to the corporate debt restructuring (CDR) cell.
The Mumbai-based bank made a provision of Rs 2,790 crore ( against Rs 2,782 crore in Q1 FY12) to cover potential loan losses in the April-June quarter. Banks refer certain accounts in their lending portfolio to a special cell known as CDR cell when a particular company is going through a temporary rough patch. This entails modification of original contractual terms to provide for concessions of interest, or principal, or for an extension in maturity period.
For the quarter ended June 30, 2012, the bank’s gross NPA and net NPA sequentially increased by about Rs 7,500 crore and Rs 4,500 crore, respectively.
In April-June, gross NPA ratio increased to 4.99 per cent (from 4.44 per cent in March, 2012) and net NPA ratio increased to 2.22 per cent (from 1.82 per cent in March 2012).
“NPAs have been a bit of an aberration for the bank,” said Chaudhuri.
NPAs in the April-June quarter came mainly from a power company, a highway construction company and a pharmaceutical company.
Cautious lending
The bank said it will be cautious on lending to mid-corporates due to stress in the segment.
The bank sees infrastructure, steel and engineering as sectors with capacity to absorb more credit.
satyanarayan.iyer@thehindu.co.in
The bank sees infrastructure, steel and engineering as sectors with capacity to absorb more credit.
satyanarayan.iyer@thehindu.co.in
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