SBI’s Chairman Designate Wants The Bank To Look Beyond Bad Loans

The country’s largest lender State Bank of India has spent the last two years trying to clean-up its balancesheet. The task is far from complete. The bank has seen 10 percent of its loan book go bad and resolution of large stressed assets remains a challenge. Despite that, the bank’s soon-to-be-chairman hopes to shift the focus back towards growth.

Rajnish Kumar, who was in-charge of retail banking at SBI until now, will take over as chairman next week. In an interaction with journalists, Kumar said that while stressed asset management will remain a priority, he hopes that part of the top management will focus on growing the bank’s business.

“Stressed asset management will continue to be our top priority. A change in leadership does not necessarily mean a change in strategy,” Kumar said in his first official media interaction after his appointment was made public on Wednesday.

But the chairman-to-be wants to approach the problem slightly differently. Kumar intends to leave stressed asset management to a set of top executives and free up other members of the management team to focus on the bank’s growth strategy. Details of this plan would be made public in the days to come, Kumar said.

To be sure, SBI already has a stressed asset management group (SAMG), which is led by Deputy Managing Director, Pallav Mohapatra. This group focuses on recovering bad loans. Last month, sources within the bank told BloombergQuint that the bank was also planning on creating a special solutions group which could take over the increasing number of cases which are being referred for insolvency.

One way to free up top management to focus on matters other than stressed assets would be to improve bench strength.

The bank has submitted a proposal to increase the number of managing directors in the bank, which is pending with the government, said Kumar. Such an addition would require a change in the law, he added. Presently, the bank has four managing director positions - one for the national banking division, a second for large corporate accounts, a third for associates and subsidiaries and a fourth for compliance and risk management.

Explaining his strategy to grow the bank’s book, Kumar said he would like to focus on the retail and infrastructure lending. Banks have stayed away from infrastructure lending in recent years as loans given to the sector have proved to be the biggest cause of bad loans.

Kumar thinks a relook is warranted.

“There was a time when there was a lot of optimism on infrastructure and things did not turn out the way it was expected. Now the underwriting standards have improved and we will be cautious while growing. But cautiousness does not mean that we are risk averse. We are looking at good opportunities to lend in this space,” Kumar said.