SBI sees slowdown in NPA build-up (May 22, 2017)

Generation of new nonperforming assets (NPAs) is slowing down for the country’s largest lender State Bank of India (SBI). “Slippages are slowing. Not only the Reserve Bank of India, many ministries are working with us to resolve issues relating to individual sectors, like steel ministry, are coming out with a number of things. Similarly, we are talking to power, mining, textile ministries and each of them is putting forth their requirements,” SBI chairman Arundhati Bhattacharya said during the earnings press conference. While there would be short term pain as the banking sector goes for NPA resolution under new guidelines, efforts of the government to ease situation of different sectors would help SBI emerge taller, sharper and healthier in the next financial year.

Net NPA ratio has come down to 3.71%, down both yearly (3.81%) as well as sequentially (4.24%). “We have been able to contain our slippages to Rs.40,000 crore during the year (as against Rs.64,000 crore in FY16),” she said. There are still stress points in several sectors which might throw up some nasty surprises during the year. “The risks are micro. We are all wary about the telecom sector,” she said. “Due to a number of reasons, including hyper-competitiveness, the sector has come to a point that can be seen as just short of needing a bail-out. Total debt for the sector is at around Rs.4.5 lakh crore, while revenues are around half of this.

Despite this, tariffs have been going in the opposite direction of inflation,” Rajan S Mathews, director general, Cellular Operators Association of India (COAI) had said, while criticising the levy of 18% goods and services tax rate on the sector. While slippages would largely continue to sober down, there would be pain from NPA resolution during the current year and SBI has asked for relief in terms of spreading out provisioning requirement. “As per current regulations, all provisioning has to be taken upfront.

But we have asked for some dispensation to spread it out to first few quarters. We have already done close to Rs.1,700 crore of extra provisioning above the regulatory requirement and that’s why our PCR (provision coverage ratio) has gone up to 66% from 62.87% sequentially. We have kept these provisions as we do expect that we need to take some pains as we progress with the resolutions. To that extent, credit costs wouldn’t come down. FY19 would definitely be much- much better,” Bhattacharya said. On the positive side, SBI would reap advantages of scale to be gained from the merger of associate banks.

Higher exposure of the five associate banks to retail credit, as opposed to SBI standalone’s proportionately higher corporate lending, would help improve margins, while the overall credit cost would come down as customers of these banks start getting lesser interest on their deposits. The cost of the merger has been taken on the books and this would have a positive impact on margins going forward as the above benefits of the merger start flowing in.

SBI may merge credit card JVs (May 16, 2017)

State Bank of India (SBI) may look at merging the two companies of its credit card joint venture SBI Card after the exit of GE Capital. SBI Card is a joint venture between SBI and GE Capital, wherein SBI owns 60% and the balance is being held by GE Capital, which has announced its plans to exit as part of its global business revamp. SBI Card is operated through joint-venture companies — SBI Card & Payment Services, which focuses on the marketing and distribution of the credit cards, and GE Capital Business Processes Management Services, which handles the backend technology and processing needs of SBI Card.

Tatas Star chain, SBI tie up for cards (May 16, 2017)

Retail hypermarket chain Star Bazaar, a joint venture between Tata and the UK retailer Tesco, has entered into a partnership with SBI Cards and Tata Capital to launch a credit card. The retailer will target its 1.2 million loyalty card holders by offering 3.5% value back at all its outlets. JamshedDaboo, managing director of Trent Hypermarket (that operates Star Bazaar), said that the retailer is targeting one lakh cards in the first year. The company plans to take its network to 65 stores by the end of this year, and to 200 by 2020, Daboo said. “We will open in one more city in the south, after Mumbai, Pune and Bengaluru this year,” Daboo added. At present, there are 41 Star Bazaar outlets of which 10 are large format of approximately 25,000-50,000 sq ft. The new stores will be Star Market, which is more a mid-size format at an average size of 7,500 sqft, Daboo said. Tata’s partner Tesco is one of the largest card issuers in the UK and has floated its own bank

SBI clarifies ATM charge hike only for wallet customers (May 12, 2017)

State Bank of India has clarified that the proposed hike in ATM withdrawal charges will be applicable only to customers of its mobile wallet State Bank Buddy. ATM withdrawal charges are being revised to Rs.25 per transaction for these customers from June 1, an SBI spokesperson said.

Savings accounts The limit of four ATM withdrawals in a month only applies to the ‘Basic Savings Banks Deposit Account,’ he added. All normal Savings Bank accounts will continue to get eight free ATM transactions (five SBI ATMs three other bank ATMs) in Metros and 10 free transactions in non-Metro (five SBI ATM five other bank ATMs), apart from the bank transaction. Cash deposit through banking correspondents of up to Rs.10,000 (in multiples of 100) will be charged at 0.25 per cent of the value with a minimum of Rs.2 and maximum of Rs.8, plus service tax. Cash withdrawal through the same channel of up to Rs.2,000 (multiples of 100) will be charged at 2.50 per cent of the transaction value (minimum of Rs.6), plus service tax. Service charges for basic savings bank deposit accounts for issue of cheque book, ATM cards and withdrawals too have been revised. Issue of a 10-leaf cheque book will now cost Rs.30 plus service tax; a 25-leaf book, Rs.75 plus service tax and 50-leaf book at Rs.150 plus service tax. As for issue of ATM card, only RuPay classic card will be issued free of cost.

Net transfers Revised guidelines allow four withdrawals in a month, including ATM withdrawals, free of charge. Beyond this, service charges applicable will be Rs.50 plus service tax per transaction at the branch; Rs.20 plus service tax at other bank ATMs and Rs.10 plus serivce tax at SBI ATMs. IMPS fund transfer charges through internet banking/UPI/ USSD will be Rs.5 plus service tax for amounts of up to Rs.1 lakh; Rs.15 plus service tax for above Rs.1 lakh and up to Rs.2 lakh; and Rs.25 plus service tax for above Rs.2 lakh and up to Rs.5 lakh. As for service charges for exchange of soiled/imperfect notes, up to 20 pieces and value of Rs.5,000 will demand no charge. More than 20 pieces will invite Rs.2 per piece on the entire tender, plus service tax. For value above Rs.5,000, Rs.2 per piece or Rs.5 per Rs.1,000 plus service tax, whichever is higher on the entire tender, will be levied. For example, for 25 pieces of Rs.500 that is equal to a value of Rs.12,500, the charges will be Rs.2 per piece (Rs.50 plus service tax) or Rs.5 per Rs.1,000 (Rs.62.50 plus service tax). The amount to be charged will be Rs.62.50 plus service tax.

SBI's Big Push for Affordable Housing (May 12, 2017)

State Bank of India has clarified that the proposed hike in ATM withdrawal charges will be applicable only to customers of its mobile wallet State Bank Buddy. ATM withdrawal charges are being revised to Rs.25 per transaction for these customers from June 1, an SBI spokesperson said.

Onus on Home Min to produce Mallya on July 10 (May 11, 2017)

State Bank of India (SBI) - the largest Home Loan provider in India has aken a giant leap to give a philippe to the affordable housing segment keeping the Prime Ministers vision of providing “Housing for All” by 2022. SB! has announced rate cut in Home Loans by 25 basis points to 8.35% per annum.

We Should Try to be Among Worlds Top 30 (May 11, 2017)

Excerpts from an interview with State Bank of India chairman Arundhati Bhattacharya...

On preparations for the merger
We started with putting together a team at the corporate centre and transition teams on ground. There were seven groups, including technology, accounting, credit quality, organisational structure and human resources. Each group had members from both SBI and the subsidiary working out challenges, gaps and what we wanted to achieve. Then there was the monitoring committee led by the MD of associates and subsidiaries and MDs of the associate bank. I will sit in on the review process of the plan on a quarterly basis or more frequently, if needed.

On the most challenging part of the process
Two things. The first is the HR piece. It is a question of so many people coming into the organisation. When we discuss a merger of two parties, we talk of culture. Here, the DNA and culture of seven organisations are coming together (SBI, five subsidiaries and Bhartiya Mahila Bank). We have to make sure the people are handled and reskilled properly. HR is the biggest challenge. The other thing is IT. While everyone uses the same central system, the versions are different, patches are different. There were 350 applications in different banks which need to be aligned. There were overlaps, so we needed to pick one. In some cases, we felt we did not need to pick it at all. We ran 62 mock trials of the data merger to ensure that the final integration works smoothly.

On whether the process will divert focus away from the core business
Not at all. For all those not involved in the merger process, it was business as usual. To ensure that people would not take their eyes off routine banking, we opened clear lines of communication. Internally, we held town halls. Managing directors of subsidiaries held interactive sessions on a regular basis to ensure people didn’t pull back on work. Among customers, there is more than 80% overlap in the loan books, so teams were patched together and handed over to single customer relations managers. A few days ago, we discussed how we can showcase better abilities to the customers of erstwhile banks. Under SBI, we can offer any loan product that was not available to subsidiary customers so far.

On competing against the private sector
We will have a bigger reach along with our global presence. This is a network customers can truly leverage. It gives us an even bigger advantage in the retail space. We can leverage technology synergies. For example, a customer can generate a token number from the app and needn’t stand in line at the branch. Our digital and social media efforts can now be combined. The move also frees up some very highly skilled people. Earlier, there were five treasuries using 200 people. The expanded treasury is only using 20 more people, so 180 highly-trained staff are free for other tasks. In the corporate book, we have 80% common customers. So six independent teams were serving accounts of the big conglomerates but now we need only one. These high quality and skilled teams can be redeployed. There were also some gaps in mid-level management that arose from lower hiring in certain years. Those have been bridged completely.

On how long before competitors have to face up to the new SBI One or maximum two quarters!

On global prospects
We will grow our international banking in a way that makes sense for us. We have some very good prospects in the neighbourhood. We will be in places where there is a market especially for our kind of offerings. We should gradually try to be among the top 30 from the current top 50 globally.

On targets from the merger
Increase the retail share in the portfolio from the current 54%. Our agri business and SME have been de-growing, which we should correct.

SBI stakeholders to elect 4 independent directors on June 15 (May 08, 2017)

THE State Bank of India has invited applications for appointment of four independent directors to its central board who will be elected by the public shareholders on June 15. The election has been necessitated after the resignation of Sunil Mehta and the expiry of the three-year-term of the three other directors – Deepak Amin, Sanjiv Malhotra and MD Mallya, the bank said in a notice.

The term of appointment for the four new directors will be for three years till 2020, and the election will be held during the forthcoming general meeting of shareholders on June 15, it said. “The election of directors is being held to fill in the vacancies arising out of the retirement/resignation of the four directors elected by eligible shareholders of the bank, other than the government,” it said. Any shareholder having not less than 5,000 shares either in his/her name or as first named holder when jointly held,is eligible to contest the election.

Led by Chairman Arundhati Bhattacharya, who is on an extension till September, the central board of SBI comprises four independent directors, two government nominees, one representative from RBI and also four of its managing directors. Nomination form and the format of declaration and undertaking to be submitted by shareholders are available with the secretariat of the chief general managers at all the local head offices and the central board secretariat at the corporate centre of the bank in Mumbai.

The final date for submitting the documents is May 24, the notice said. If the total number of valid nominations exceed four, there would voting for the election at the general meeting. Any shareholder other than government with over 50 shares each for a minimum of three months prior to the date of the general meeting will be eligible to vote in the election, the public notice said.

Banks looking at bilateral pact to sell Kingfisher House (May 08, 2017)

Lenders are considering making a fresh attempt to sell Kingfisher House here to recover their dues from Vijay Mallya, adopting a model followed in recent sale of the defaulter businessman’s posh Goa villa. Repeated attempts to auction the Mumbai property have failed to find a buyer, which was the case for sea-facing Goa villa as well until the banks entered into direct negotiations to clinch a bilateral pact with the buyer. Banks have the option to sell the properties under their possession through a private agreement with a buyer, if at least two auctions of such properties failed. With the sale of the villa, at least a process has been initiated.

We may explore the option of selling Kingfisher House through a bilateral agreement, a banking source said. Earlier this month, the 17-lender consortium led by State Bank of India sold the Kingfisher Villa for Rs 73.01 crore to Sachiin Joshi of Viiking Media & Entertainment, after failing to sell it through auction thrice since last year.

The plush property situated at Condolim in north Goa was sold through a private deal between lenders and Joshi. It was sold at just Rs.1 lakh above the last fixed reserve price of Rs.73 crore. Mallya owes over Rs.9,000 crore to bankers, taken for his defunct Kingfisher Airlines but alleged to have syphoned off a good portion to his shell companies in overseas tax havens. Mallya has been declared a wilful defaulter and is wanted by authorities for default in payment of loans.

Lenders have made four failed bids to sell the Kingfisher House, the erstwhile headquarters of Kingfisher Airlines located at Vileparle near the airport. At the last auction of the Kingfisher House in March this year, the SBI-led consortium had set reserve price at Rs 103.50 crore, 10 per cent lower than the third auction held in December 2016 when the reserve price was kept at Rs.115 crore.

In the first failed auction of over 17,000 sqft Kingfisher House in March 2016, reserve price was fixed at Rs.150 crore but was lowered to Rs.135 crore for the second futile auction in August. Mallya, who was arrested by the Scotland Yard last week as part of an extradition process but was released on bail within hours, owes over Rs.9,000 crore to lenders like SBI, PNB, IDBI Bank, BoB, Allahabad Bank, Federal Bank and Axis Bank, among others. He fled the country on March 3 last year and is currently in London.

Bad loan mess to resolve in three years: SBI chief (May 05, 2017)

STATE Bank of India, the country’s largest, sees a "positive turnaround" in the nation’s bad loan mess after the government implements a new rule aimed at resolving the problem, chairman of the lender said. "The non-performing asset cycle is different this time," Arundhati Bhattacharya, State Bank’s top executive, said in an interview in Yokohama, Japan. "Many assets are good quality and required by the economy — when growth turns up, they will perform again." The Cabinet has approved a plan to give the Reserve Bank of India more power to order lenders to deal with bad loans, according to a government official with knowledge of the matter. Bhattacharya said while she doesn’t have details, she expects it to empower the regulator to resolve India's bad loan problem within a few years. "It’s not going to be such a difficult cycle to turn," she said from the sidelines of the Asian Development Bank's annual meeting.

"Economic indicators point to a revival in demand very shortly. If you can get these assets to participate in that cycle again, I think this is an issue that can be resolved in two to three year time, maximum." The 10-member Bankex index added 2.8 per cent on Thursday and touched a record high on optimism that new government rules would help resolve the world's worst stressed-asset ratios. State Bank’s shares rose 3.2 per cent to 299.05 rupees, the highest since March 2015. Asia’s third-largest economy is being weighed down because the soured loans on banks' balance sheets hinder credit growth and job creation. Various programmes proposed by the central bank to resolve the problem have been unsuccessful, with lenders reluctant to write down assets sufficiently and company owners unwilling to negotiate repayment plans. Stressed assets — made up of bad loans, restructured debt and advances to companies that can’t meet servicing requirements — have risen to about 16.6 per cent of total loans, the highest level among major economies, data compiled by the government shows.

"India needs a lot more infrastructure than it currently has and therefore it does not make sense to throw it away — rather it makes sense to revive them," Bhattacharya said, speaking of the assets underlying the bad debt. Bhattacharya, whose term as chairman ends in October, is striving to boost earnings even as she contends with persistently high bad loans and lower credit demand. The government has yet to announce her successor at the bank even with her tenure set to end in five months. Appointed in October 2013 as the bank's first female chairman and most-senior executive officer, Bhattacharya strengthened the lender's credit monitoring and measures to recover bad debt.

State Bank is 57.6 per cent owned by the government and will report March quarter earnings on May 19. After the merger earlier this year with five of its units, the bank is looking to consolidate and doesn't plan to do any more mergers for the moment, Bhattacharya said. "Going forward, because we have done this merger, in the next two years we don’t plan to grow the network," she added. "We will relocate 1,800 of these branches. We will close down branches where there is an overlap and we will reopen them where our presence is thin." The company took on 70,000 staff through that merger, and expects 17,000-17,500 of those to retire this year, she said, adding that "we are rationalising manpower, we are expanding our reach with the same resources and we are digitising very rapidly."

SBI asks banks to avoid shorting bond market (May 05, 2017)

The chairman of State Bank of India (SBI) said banks should avoid short selling of sovereign bonds purely for speculative gains, since that may deter investors from lending the notes in the repurchase market. The bond market faced at least three incidences of a so-called repo- squeeze in March and April as investors running overnight outright short positions in sovereign debt weren’t able to borrow the securities needed to finance them.

That drove the participants to the secondary market, causing yields on the most-traded notes on those days to slide. “Those bankers who are shorting the market for short term speculative gains need to avoid doing that,” Arundhati Bhattacharya, chairman of India’s largest public sector lender, said. “Lenders in the market also need to be able to go ahead and lend whenever there is a requirement.” Bhattacharya said she doesn’t expect any more repo squeezes. Investors such as banks and primary dealers borrow and lend fixed-income securities in the repo market.

The repos are vital because they allow traders to finance positions in the broader fixed-income market, helping deepen it, while also playing a role in determining borrowing costs. “Shorting is an integral part of any market which functions smoothly,” according to Sandeep Bagla, associate director at Trust Capital Services India Pvt. “By allowing shorting, market levels are allowed to reflect the views of all participants,” Bagla added. On two days in early March, India’s most-traded bonds became virtually unavailable in the repurchase market as banks refused to part with the securities. A similar situation occurred again in early April. “I think there was a lot of shorting in the market and therefore there were lenders who didn’t want to go ahead and lend,” Bhattacharya said. “

I think what needs to be done is there has to be more discipline on both sides.” The bank also sees a ‘positive turnaround” in the nation’s bad loan mess after the government implements a new rule aimed at resolving the problem. “The non-performing asset cycle is different this time,” Bhattacharya, said. “Many assets are good quality and required by the economy -- when growth turns up, they will perform again.” India’s Cabinet has approved a plan to give the Reserve Bank of India (RBI) more power to order lenders to deal with bad loans, according to a government official with knowledge of the matter. Bhattacharya said while she doesn’t have details, she expects it to empower the regulator to resolve India’s bad loan problem within a few years. “It’s not going to be such a difficult cycle to turn,” she said from the sidelines of the Asian Development Bank’s annual meeting.