SBI cautious about giving corporate loans

SBI cautious about giving corporate loans

By ABHINANDAN MISHRA | New Delhi | 3 September, 2017
SBI, CAG, NPA, Reserve Bank of India, Kingfisher Airlines, corporate loans, road segment
The State Bank of India (SBI) has been forced to adopt a policy of exercising extreme caution while dealing with advances (loans) to the Corporate Account Group (CAG) that consists of loans of Rs 50 crore and above.

The State Bank of India (SBI) has been forced to adopt a policy of exercising extreme caution while dealing with advances (loans) to the Corporate Account Group (CAG) that consists of loans of Rs 50 crore and above. The precautionary measure follows the Vijay Mallya fiasco and the increasing cases of loans turning into non-performing assets (NPAs).

The SBI had lent close to Rs 1,200 crore to the beleaguered Kingfisher Airlines of Mallya. The CAG segment is divided into two classifications, the Mid Corporate Group (MCG) and the Large Corporate Group. Mid Corporate customers are those entities that avail advances of above Rs 50 crore and up to Rs 500 crore. Advances above Rs 500 crore are defined as Large Corporate Group. At the end of March 2017, SBI had given Rs 341,990 crore as advances to the large corporate segment, a measly rise of 3.59% from what it had given at the end of March 2016 (Rs 330,136 crore). Similarly, in the Mid Corporate Group segment, which consists of loans between Rs 50 crore and Rs 500 crore, the bank saw an increase of only 0.21%. At the end of March 2016, the advances to this section was Rs 242,443 crore. The figure increased to Rs 242,947 at the end of March 2017. The biggest gainer of this new policy was the agriculture and retail sectors as they saw a rise of 7.45% and 21.18%, respectively, in the advances given to these two sectors by the SBI for the same corresponding time period (end of  March 2016 and March 2017) . As a result of the bank exercising extreme caution, the advances given to the “Infrastructure” segment, which includes critical sectors like power, telecommunication, roads and ports, were impacted. At the end of March 2016, the advances given by SBI to this segment were Rs 207,522 crore which comprised 16.70% of the total advances given that year. However, at the end of March 2017, this segment was given an advance of Rs 208,915 crore, which amounted to 15.58% of the total advances given in the particular financial year. The “road segment”, in fact, registered a negative growth compared to 2016, when Rs 18,934 crore was given under this segment. At the end of March 2017, the figure stood at Rs 15,985 crore. This has also led to a reduction in net NPA percentage from 3.81% at the end of March 2016 to 3.71% at the end of March 2017. According to bank officials, the bank has been asked by various regulators (the Ministry of Finance, Reserve Bank of India) to exercise extreme care, rather than liberally giving away huge amounts of loans to the Corporate Account Group.

“In the past 5-6 years, the bank’s policy of ‘liberal due-diligence’ resulted in even undeserving projects being financed and a lot of the advances were ‘lost’. Now we are following the principle of joining hands with only those who can assure us, without any iota of doubt, that the money will not be lost,” an official, who works with the CAG segment, said.

 

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