Anticipated Improvement In SBI Asset Quality
According to prominent sources within the State Bank of India (SBI), the bank is anticipated to present enhancements in its asset quality during the unveiling of the first quarter's outcomes. Top executives of SBI, when queried for their input, chose not to disclose any information. The Managing Director of SBI, S.K. Bhattacharya, expressed, “We are unable to divulge details prior to the announcement of the first quarter results.”
During the fiscal year of 2007-08, the credit quality of SBI had experienced a decline, primarily due to an accrual of fresh bad loans totaling approximately Rs 2,700 crores, predominantly from retail loans and to some degree from mid-sized corporate loans. As of March 31, 2008, the bank’s gross non-performing assets (NPAs) amounted to Rs 12,837 crores compared to Rs 9,998 crores a year ago.
However, SBI is projected to establish a provision of around Rs 1,000 crores due to mark-to-market (MTM) losses on its investments. This sum is expected to cover losses from the depreciation of bonds the bank received from the government in connection with its rights issue, with approximately Rs 700 crores allocated for this purpose.
During the period of April-June 2008, banks encountered MTM losses due to the depreciation of bonds and equity investments. Nevertheless, SBI is expected to achieve double-digit growth in the first quarter terminating June 30, 2008, compared to the same period the previous year, despite a slowdown in loan demand from sectors such as commercial real estate and the automotive industry.
The government’s debt waiver-cum-relief scheme is also expected to assist SBI in diminishing its bad loans by an additional Rs 2,000 crores. By waiving overdues of approximately 25 lakh farmers, aggregating about Rs 7,000 crores, SBI has estimated that around 30% of the total waived sum had previously become Non-Performing Assets (NPAs). On March 31, 2008, the gross NPA stood at 3.04% while the net NPA stood at 1.78%.