State Bank of India (SBI), the country’s largest lender, is scaling down its loan growth estimate for the current financial year by at least 700 basis points to 18 per cent in the wake of lower demand for loans.
At the beginning of the financial year, the bank had expected to expand its loan book by over 25 per cent. However, due to a decline in demand for loans, the growth rate till December-end dropped to around 16 per cent.
SBI Chairman O P Bhatt told reporters at a press conference that during the year ending March, the growth rate would be around 18 per cent.
Despite the slowdown in loan growth, SBI is growing faster than the industry. According to the latest RBI data, overall credit growth for the 12 months ended December 18 was 11.25 per cent.
Bhatt said companies were still slow to avail already sanctioned credit. With projects on hold in the wake of the slowdown, the gap between sanctions and disbursals was close to Rs 50,000 crore, he said.
“Credit growth is tentative. We do not know if the demand is due to the stimulus or due to the Sixth Pay Commission. It is early to say if the demand is going to pick up,” he said.
On bad debt, he said the ratio of non-performing assets (NPAs) to total assets could worsen. “When growth has slowed, the NPA growth will be faster. Even after the economy improves, as it has in recent months, there can be a lag effect. So, the ratio will get distorted,” he added.
While Bhatt refused to share details of how SBI would cope with the new loan-loss coverage norms, he said the bank was working to meet the stipulated 70 per cent level. SBI had a coverage ratio, that is, provision for bad debt, of less than 50 per cent.
Asked about the impact of RBI’s decision to allow banks to include write-offs while calculating the ratio, Bhatt said, “In SBI’s case, we were not accounting that earlier. This will significantly increase our coverage ratio.” Bhatt said the numbers were being analysed.
The bank has ruled out equity issues at the moment, saying it has a comfortable capital adequacy ratio of 14 per cent. Bhatt also spoke about the bank’s plan to tap retail investors through a bond issue. “Retail bond is a new instrument that we want to bring to the market. Maybe we will bring it this year. We will first test the market. The issue size will not be significant,” he said.
