Mumbai: Pratip Chaudhuri, the newly appointed chairman of India’s largest lender State Bank of India (SBI), on Friday said the bank wants to consolidate its position in retail banking in the world’s second fastest growing major economy, and maintain focus on key segments such as corporate and international banking, but highlighted the stress emerging from the relatively high level of non-performing assets (NPAs) as a key concern.
“SBI was eminently successful as a corporate bank. So we would like to expand and consolidate that franchise. Till about four years back, it was not a leader in retail, at least in the lending side. Now that we have assumed or we have been catapulted to the leadership position, we would like to consolidate our gains and increase the leadership from the second further,” Chaudhuri said in Mumbai.
The chairman, however, said the key concern of the bank at this point is the high level of NPAs and the stress seen in certain business segments.
“There has been some acceleration on the non-performing assets on a comparative basis. We will take a breather to analyse and take appropriate corrective measures to make sure that the NPA percentages are better than the industry average,” Chaudhuri said.
In the last one year, SBI has seen its bad loans growing slightly faster than the industry average, with the gross NPAs of the bank standing at 3.17% for the quarter ended December. Its net NPAs for the December quarter was 1.61%.
All other large banks in India such as ICICI Bank Ltd, Punjab National Bank, Bank of Baroda and HDFC Bank Ltd had lower net NPAs in the December quarter, though ICICI Bank’s gross NPAs was higher than that of SBI.
Chaudhuri said there will not be any major shift in the bank’s business strategies both domestically and internationally. “The growth path that we have pursued will continue. Our expectation is that we should grow slightly above the industry average, which means around 24%. Our topline growth has been just about that of the industry. We would take corrective measures and ensure that we outperform the industry,” he said. “Only thing that we feel, that wherever in this growth there are stresses developing in the system, the endeavour would be to fix that and consolidate the gains that are being made.”
Noting that it is essential for the bank to focus more on technology and talent retention as part of efforts to consolidate its position in the industry, he said SBI will continue expansion in the global markets, and explore both organic and inorganic opportunities to grow internationally.
On SBI’s special home loan scheme, or “teaser” loans (loans that offer cheaper rates to the borrower in the initial years), Chaudhuri said the bank has decided to keep the scheme alive for the time being, but moving ahead, it will take a call on the product “extending maximum available benefit to the customer, but addressing the concerns of the Reserve Bank of India (RBI)”.
“On this, we will have a dialogue with the Reserve Bank and the final course that we would adopt would be a compromise and would recognize both the objectives of delivering value to the home owner and sufficiently address the concerns of the regulator,” Chaudhuri said.
RBI has asked banks to make additional provisioning for such loans as they carry a risk of default.
Stating that higher provisions on teaser loans is “difficult” for the lender, the chairman said the bank is in dialogue with the regulator to resolve the issue.
On the merger of SBI’s associates, Chaudhuri said the bank will continue absorbing its remaining associates and has enough “experience and learning” from past mergers to go ahead with the process. “Amalgamation or merging the associate banks will continue. SBI has so far merged two of its seven associates with itself.
The bank reshuffled the portfolios of all its top executives. Hemant Contractor, who has been promoted as managing director (MD), will now oversee international operations. A. Krishna Kumar, who has also been elevated as MD, will oversee national banking. Another new MD, Diwakar Gupta, will take over as chief financial officer from Contractor.
Corporate banking will be jointly handled by two deputy MDs—Santhosh Nair and Shyamal Acharya. While Nair will oversee large corporations, Acharya’s assignment is to look after medium-sized firms.
Contractor said SBI has not put a blanket ban on the telecom sector and has started considering new proposals. Its board recently approved a Rs 1,000 crore loan for a leading telecom firm. “We think it is a good business. It is a sunrise business and the bank would be missing a great opportunity if we don’t lend to these companies,” he said.