State Bank of India (SBI) reported a very good set of numbers in the second quarter of FY22. It reported a net profit of Rs 7,626.6 crore for the quarter ended September 2021, which is up 66.7 percent on a year-on-year basis. However, the loan growth for the bank came in only at 6 percent in comparison with HDFC Bank, ICICI Bank that posted growth in mid-teens.

Throwing more light on the Q2 numbers and loan growth, Dinesh Kumar Khara, chairman, SBI, said, “Credit growth is seen in two to three broad components, one is the retail credit, which has grown at about 15 percent plus year on year, while corporate credit saw some muted growth, but having said that, I would also like to articulate that we have got unavailed limits both in working capital as well as undisbursed term loans, and both of them aggregate to almost about Rs 4,50,000 crore.”

He further mentioned, “In addition to that, we have got a pipeline for the proposals which are being processed, and that is as high as Rs 1,15, 000 crore. So, with the capacity utilisation being at 60 percent and if at all it improves, which I have all the reasons to believe that it will, then credit growth in the corporate sector is almost around the corner. If at all the month of October is an indicator for the things to unfold, I am quite encouraged by the numbers that you have seen in the month of October for corporate credit. That gives me hope and confidence that the remaining part of this quarter and the remaining quarters of this financial year, we should get to see some decent growth in corporate credit.”

“We have already registered a credit growth of about 6 percent plus and our international book is doing very well, that is growing at 16 percent plus, retail is doing very well, corporate was the only one which was pulling us down. So, the early signs give us confidence that we should be in the range of between 9-10 percent in terms of credit growth at the end of the financial year,” said Khara.

On net interest margin (NIM), Khara said, “It is bound to operate in a range, I expect 3.10-3.25 percent to be the normal range. This is what we aspire for and hopefully, we should be in a position to achieve that.”

On the sectors that are asking for money, he said, “It is the commodity sector that has already hit the roof as far as capacity utilisations are concerned, they have already reached out for expansion in capacity and so the bank has been processing their loans. Infrastructure is another sector that continues to hold the potential along with FMCG on the back of revival of the demand.”

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On NPAs, he said, “As far as corporate credit is concerned, we do not see any challenge and the bank has already provided for whatever potential risk was seen. As far as retail is concerned, the quality of retail is exceptionally good, and hope is that it will remain good going forward.”

SBI's gross non-performing assets (NPAs) came in at 4.9 percent in the second quarter of the current financial year, as against 5.32 percent in the three months to March 31.

“We did see some challenges at the end of the first quarter of this financial year. But our collection machinery was strengthened significantly. Our collection calls including pre-collection calls, which was not a reality in this bank, but we have started doing the pre-collection calls, this means that we have started informing customers well in advance when their EMI is falling due. So that kind of customer-centricity has helped in pulling all stress asserts in the retail sector back to what it was as of 31st of March 2021,” Khara said.

Therefore, going forward, Khara does not see a concern with regards to the asset quality both on the corporate as well as on the retail side.

He mentioned that the bank has a restructured book of about Rs 30,000 crore and looking at the history of the probability of defaults, generally about 70 percent hold ground; only about 30 percent go under.

Khara further said, “The current restructuring which was done has happened essentially on account of the disruption in cash flows on account of COVID. We have also seen that the cash flows have started building up very fast. So, those people who had gone for restructuring some of them have already started honouring their commitment and are becoming quite healthy as well. So, going by that, we have kept COVID-related provision, which is almost Rs 6,200 crore. We have provided well for the potential risk which might emanate from this. But we will be seeing the behaviour very closely and ensure that the book stays insulated from any potential risk.”

For the full interview, watch the video.

(Edited by : Dipikka Ghosh)