State Bank of India (SBI) chairman Arundhati Bhattacharya said the bank might revise its FY17 credit growth guidance upwards later this year.
“I’ve said 12% this year and 14% was what I had said last year. We’re already growing at very close to 12%, despite this being the slow quarter. That being the case, we may revise the projections sometime in the middle of the year,” she said on the sidelines of a FICCI banking event.
Bhattacharya also said the growth in credit will ultimately be a function of the availability of viable projects. “It depends on how the projects come, how the bidding happens in various areas and whether bidding happens in a manner we feel comfortable with. Last time, there were lots of risks that were not covered and we have pointed those out for mitigation. The fact that we’ve been able to grow at 12% (in the slow season), gives us hope that we’ll be able to keep this up,” she said.
The comments of SBI chairman came a few days after the lender reported a 10.7% (Y-o-Y) growth in its loan book to R14.16 lakh crore for the quarter ended June, with several other large public sector banks (PSBs) reporting a decline.
Bank of India (BoI), for instance, reported a 5.4% (Y-o-Y) decline in its loan book in Q1FY17 and its MD & CEO Melwyn Rego expects the loan book to grow by just 6% in the current fiscal.
Bhattacharya also spoke on the Scheme for Sustainable Structuring of Stressed Assets (S4A) and said the fact that it was relevant only to stressed assets, in which current cash flows can service at least 50% of the debt, makes it unsuitable for several of them.
“If you take only the current cash flows, then it is really difficult to come up with projects which have 50% sustainable debt. If you’re projecting only on the basis of current cash flows, you’re not taking into consideration their interest flows, which will go down when you do the cut in the debt.
“And therefore, they’ll have better ability to ramp up capacity. You’re not taking the upside on it at all. If you want to take the upside, then the sustainable debt may go to 70-80%. These are questions we’re looking at,” she said.
Bhattacharya added that the forensic study that is required for invoking S4A is complete for one or two accounts, and once the bank receives them next month, it will be in a better position to take a call on whether to invoke it or not.
The RBI has been increasingly empowering banks to deal with stress assets through various schemes, the latest of these being S4A, which was introduced in June. S4A allows banks to resolve stressed loans by bifurcating the sustainable portion of the debt from the unsustainable part and converting the latter to redeemable cumulative optionally convertible preference shares.