Davos 2020: SBI’s Rajnish Kumar Expects Little Impact From RBI’s June 7 Circular
The nation’s largest lender expects to witness little impact from the Reserve Bank of India’s June 7 circular—aimed at addressing stressed assets in a swift manner—in the quarter ending March.
Rajnish Kumar, chairman at State Bank of India, said the impact would be contained since most of the stressed accounts, where the deadline to finalise a resolution plan ended, were already non-performing assets or had already been provided for.
“A very huge number was already under NPA. Many of these accounts have been 100 percent provided for already. Many of the accounts got resolved, that is, they were rectified and regularisation happened,” Kumar told BloombergQuint on the sidelines of the World Economic Forum 2020 in Davos, Switzerland.
The central bank’s circular mandates either a 50 percent provisioning for a stressed account or insolvency proceedings if a resolution plan is not decided within 210 days of the first default. Banks, including SBI, had to sign inter-creditor agreements within the first month of the default during the June-July period. For most of these accounts, the 180-day deadline ended in the first week of January.
While Kumar refused to divulge more details, he said for SBI there would be no fresh additions due to the June 7 circular. “We are looking at 34 accounts, either as leader or participant, and many of them are already NPAs so no fresh additions [will] happen as a result of that. Some of them are already under our radar where slippages may be there. It was to happen, whether the June 7 circular or not.”
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Kumar also expressed concerns about the build-up of stress in the telecom sector, saying that the closure of any network operator will have far wider consequences than just for the sector. “It’s not about the banking system alone. I don’t think that there can be two different opinions either in the government or in the banking system or the sector itself,” he said. “Any closure of a telecom company at this stage would not be good for the sector, for the economy and for the consumers.”
The SBI chief also agreed that the government should do what it takes to allow telecom companies some breathing space regarding the pending adjusted gross revenue dues that has been forced upon them by the Supreme Court.
- While India’s economic numbers aren’t looking good, slowdown is getting attention at the highest levels.
- Barring one or two large accounts, SBI is seeing an improvement in corporate accounts.
- Expects 8-10 deals in the real estate sector to be done by March by the real estate rescue fund promoted by government.
- Expects three-four power cases in IBC getting resolved by March 31.
- Recovery happening in the power sector is in line with the provisioning made, so no further stress addition.
- Capex cycle revival is a must, government doing major share of infrastructure investment.
- Fiscal expansion is advisable at this stage.
Watch the full interaction here.