SBI may not need more provisions for NPAs: Rajnish Kumar

Rajnish Kumar, chairman of State Bank of India, sees this year of hope and next year of happiness after posting a record loss of Rs 7,718 crore in the fourth quarter. In an interview with Anurag Shah of Zee Business, he spoke on the results, bad loans, recovery and the bank's plans.

The bank's fourth-quarter results have been disappointing. Do you feel that the Reserve Bank of India's February 12 circular on non-performing assets (NPAs) had a role to play in this?

As far as the decisions are considered, I believe it depends on the point of view under which it is evaluated. If you look at the headline profit figure, the outcome was disappointing. But if you look at the challenge of asset quality we were faced with, the recognition of non-performing assets, and the amount of provisioning done, not to mention the merger of six State Banks, I think the current state of the bank is relatively strong. Along with this, our capital has remained exceptionally strong; this is why I will not say that the outcomes of one year's decisions have gravely affected us. I can say on behalf of my whole team that our morale is very high and we are trying our level best to grow the business. This is why this is a year of optimism. The speed of the NPA generation was marginally less last year, but this year it is less than half. This has only boosted our optimism. Our operating income, digital income, everything is very strong. The only hit we faced was because of provisions.

How does the resolution of the Bhushan Steel account influence recovery in Q1? Many cases have gone to the National Company Law Tribunal (NCLT) and many are currently being resolved. Do you feel the provisioning measures undertaken by you will provide comfort to you?

Definitely. Our current provisions are 56%, which I feel with reference to recovery is positive, and hopefully, we will not need additional provisions. The recovery possibilities, considering that in almost every case the estimates have been made regarding how much recovery is possible. Keeping this in mind, the bank will get the opportunity for a writeback. Whether this opportunity comes in the first quarter or the second, this depends on both time and the decisions taken by NCLT and NCLAT (appellate tribunal).

In the last quarter, how many slippages occurred? Which sector contributed to it?

There was a slippage of Rs 33,000 crore. The most contribution came from the power sector. Telecom sector, too, has a rather big account which influenced the slippage. Nonetheless, there was no reduction from our side in either the recognition of NPA or provisions, with reference to the February 12 circular of the RBI.

The government has provided a deadline of December 2018 to resolve all cases filed with the NCLT. Overall, how much haircut have you estimated in this?

I am hoping for great recovery, but according to the bank's current provisioning policy, it is aggressive provisioning that is on the rise. I believe the bank's balance-sheet's strength holds more importance than quarterly profits and losses.

You said this year you will move forward in your subsidiaries for value unlocking. How much quantum do you predict with regard to this value unlocking; and which companies will it pertain to?

We are trying to bring a partner on-board with regard to SBI Capital Markets. There is some stake in SBI General too, which can be put out for sale. SBI Life can be encashed anytime after the lock-in period is over. Apart from this, the small investments can be taken into consideration as and when their value increases. The State Bank subsidiaries are giving us a good return, and all of our subsidiaries are leading in their own fields. Their evaluation will be done by next year.

If at all RBI hikes policy rates, will you too have to change your cost of deposit?

If the cost of deposit is affected, then the marginal cost of lending rate will be increased by the bank. We are waiting for RBI's policies, which will be announced next month. As of now, SBI does not wish to change its cost of interest. As and when the policies are out, we will watch and monitor, and then bring about changes that we feel are necessary.