SBI recovers Rs 2,000-cr bad loan

[suguhopes]

KOLKATA: State Bank of India (SBI) is likely to report an improvement
in its asset quality when it presents its first quarter results.
According to top SBI sources, the bank has recovered bad loans worth
around Rs 2,000 crore during April-June 2008.

Top SBI executives, when contacted, refused to comment. SBI managing
director SK Bhattacharyya said: “We can’t divulge details before the
first quarter results announcement.”

SBI’s credit quality had deteriorated during 2007-08, as it booked
fresh bad loans worth Rs 2,700 crore, mainly on account of retail
loans, and to some extent, mid-sized corporate loans. As on March 31,
2008, the bank had gross non-performing assets (NPAs) of Rs 12,837
crore compared with Rs 9,998 crore, a year back.

“On the other hand, the bank is slated to make a provision of around
Rs 1,000 crore against mark-to-market (MTM) losses of its investment,”
an SBI official said on conditions of anonymity. Out of this sum,
around Rs 700 crore is expected to be provided for against
depreciation of bonds the bank received from the government on account
of its rights issue.

Banks are booking MTM losses against depreciation of bonds and equity
investments during April-June 2008 period. Nevertheless, SBI is
expected to clock double-digit growth in the first quarter to June 30,
2008 over the corresponding period a year back. This is despite the
fact that demand for loans from sectors like commercial real estate
and auto has slowed down.

Coming back to SBI’s bad loan management, government’s debt waiver-cum
relief scheme would help SBI reduce its bad loans by another Rs 2,000
crore. SBI has waived overdues of around 25 lakh farmers, aggregating
about Rs 7,000 crore. “It’s estimated that around 30% of the total
waived sum had become NPAs,” another SBI insider indicated. Gross NPA
stood at 3.04% as on March 31, 2008 while the net NPA stood at 1.78%.

N.Sukumar
Research Analyst