Mumbai: Asset quality stress in India’s banking sector has bottomed out, said Arundhati Bhattacharya, who retired as chairman of State Bank of India (SBI) on Friday.

“I think much of the (bad loan) recognition has already happened. Through my entire tenure, you guys have repeatedly asked are we at the bottom. I kept saying we are almost there. I feel today we are there," said Bhattacharya in her last press briefing as chairman.

“We are quite confident that we are going to see an uptick in the economy sooner rather than later," she added.

Bhattacharya, who joined SBI as a probationary officer in 1977, is being succeeded by her colleague Rajnish Kumar. She was the first woman to be appointed chairman of SBI.

After taking over in October 2013, she declared a war on bad loans and pledged to embark on a digital journey.

“These times of difficulties that we have had, I think we have used them to strengthen the bank and strengthen it internally so as to ensure that going forward the bank is in a much better position to be a part of the growth story of India," she said.

“I am sure that this will also show up in the future numbers," she added.

Bhattacharya, who is credited with pulling off the mammoth task of successfully merging five of SBI’s associate banks, said that the agenda set by Kumar—resolution of stressed loans and reviving credit growth—was in the right direction.

Currently, like most of its peers, SBI’s profitability is under strain because of bad loans and sluggish credit growth, and resolving both these issues are Kumar’s top priorities. At the end of June, the bank was weighed down by gross non-performing loans of Rs1.88 trillion or almost one-tenth of its total advances.

Bhattacharya said that a revival of credit growth was an unfinished agenda for her despite the bank’s improved risk management capabilities as well as underwriting standards. “Even today credit growth is not where we wanted it to be. So that’s an unfinished agenda. And I think the incoming chairman’s already stated that it will be his agenda to take that forward," she said.

She added that with the government’s efforts related to the infrastructure sector, affordable housing and rural electrification, among others, credit growth in the banking system is expected to pick up within this financial year.

For fiscal 2018, SBI has guided for a loan growth target of 6-8%. At the end of June, its credit growth was 1.46%. Currently, non-food bank credit growth for the banking industry is around 6%.

Bhattacharya said that steps taken by the government such as demonetization and the roll out of the goods and services tax (GST) are big reforms which will take time to settle down but in the long term will be positive for the economy.

Separately, she said that SBI is planning to launch a GST-related product where the lender will provide working capital to small companies based on their input and output tax returns. “The bank is working on a product where if you just show me input and output tax returns, I will give you money for working capital, without (asking) anything more," she said.

According to Bhattacharya, such a system would make it easier for smaller companies faced with difficulties in making cash flow projections to avail loans.

Rolled out from 1 July, GST works on a refund mechanism where the manufacturer can claim input tax credit for the inputs which it has used in the manufacture of the final product.

This mechanism has strained finances of small and medium enterprises because of delayed refunds leading to a rise in demand for working capital.

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