‘Expect double digit credit growth by Q2FY22’: Dinesh Kumar Khara, chairman, State Bank of India

I think at the end of the financial year 2021 (FY21), our credit growth should be around 7%.

The country’s largest lender, State Bank of India (SBI), expects a double-digit credit growth by the second quarter of financial year 2022 (Q2FY22). In an interaction with media after earnings, SBI’s chairman Dinesh Kumar Khara said the bank is expecting around 7% credit growth at the end of the current financial year (FY21). Khara also said that lender will not require any more provision for transferring of the asset to an asset reconstruction company (ARC) proposed in the Union budget. Excerpts:

Given there is a proposal to transfer the bad loans to a national asset reconstruction company (ARC), will any additional provisioning be required?
We are already having provisioning coverage ratio (PCR) of more than 90%. As and when it materialises, I don’t expect we will require any additional provisioning. In any case the modalities of the valuation at which the assets will be transferred is yet to be firmed up, and that is being discussed and deliberated. Once we have a clarity on that, we will have even a firmer picture. But I would say, considering the fact that even in our corporate advance book also, our PCR is as high as 87-88%, so I do not think we will require any more provision before we transfer any of the asset to an ARC and asset management company (AMC).

Can you break down your proforma slippages? Will you be able to contain your total slippages at `60,000 crore as per your earlier guidance?
In aggregate we have received Rs 18,000 crore restructuring applications. Around Rs 3,900-crore restructuring requests have come from the retail personal segment, around Rs 2,500 crore from small and medium enterprises (SME) and around Rs 11,000 crore from the corporate segment. Proforma slippages at nine months ending December 2020 remained at Rs 16,461 crore and the total restructuring requests till December 2020 are at Rs 18,125 crore. So, put together total slippages and restructuring up to Q3FY20 remained at Rs 41,216 crore. For the whole financial year, total slippages and restructuring at the end of financial year (FY21) should remain within Rs 60,000 crore.

What is your credit growth target at the end of financial year 2021 (FY21)?
I think at the end of the financial year 2021 (FY21), our credit growth should be around 7%.

Last quarter you said that SBI’s credit growth would be around 8-9%, have you revised that due to subdued corporate credit growth?
Corporate loans are subdued even now. We would see growth coming from the public sector entities’ capital expenditure. That is why I have indicated credit growth more in the range of 7%, considering the fact that only two months are left for the financial year. So, earlier we had indicated 8%, which is now deferred to 7% credit growth.

By when do you expect double digit credit growth for SBI?
I would expect from the second quarter of financial year 2020 (Q2FY22) onwards, we should be able to see double-digit credit growth.

You said that SBI expects pick-up in the corporate loan book. What gives you confidence for that?
The reason for the confidence is that if at all there is going to be infrastructure spend, the way it has been indicated in the Budget, there is going to be a definite improvement in the economic activity in the core sector which is iron and steel, cement, and construction sector. So, actually that will lead to the demand generation.

Will you revise your credit cost guidance of 2%? Where do you stand now?
As the situation stands, we should be able to keep the credit cost much lower than 2%. Even with the proforma slippages, our credit cost at the end of Q3FY20 stands at 1.1%. So, I think we should be much better than our own guidance of 2% credit cost.

After government has announced increasing the foreign direct investment (FDI) limit in the insurance sector to 74% from 49%, will your foreign partner in the insurance subsidiaries look to increase stake?
The provisions announced in the Budget says that foreign investment is permitted, but the ownership still continues with the Indian owners. At least they will have 51% ownership. As of now we do not have any such plan. May be going forward, we will evaluate at the material point of time. To my mind, as of now there is no change in the policy-thinking of the insurance subsidiaries.

Union Budget has proposed a new Development Finance Institution (DFI). Given that SBI is a large player in the project finance space, do you see any need for re-strategising as the whole idea is to take the burden of the infrastructure financing from the banking system?
It is a very welcome step announced by the Finance Minister (FM) for setting up of DFI to support infrastructure needs of the country. I would say there is an ample room for other institutions to play in this space. This space will continue to be open for us. As the market evolves, there would be situation where such loans would be subject to secondary market also. So, I think we will have enough space to grow in this particular segment. And, we perceive it as an opportunity for us to have excellent players in the space and to cater to the needs, because infrastructure needs of the economy are going to grow like anything. So, for that many more players are required.