SBI: No major risk in NBFC portfolio

State Bank of India is reviewing its exposure to non-banking finance companies (NBFCs), which currently stands at about ~2 trillion.

While the exercise is expected to be completed over the next fortnight, the bank does not see any major risk involved in its exposure to NBFCs, and the review mechanism is part of an usual exercise, said Sujit Kumar Varma, deputy managing director (corporate accounts group) of SBI, on the sidelines of a banking seminar by the Confederation of Indian Industry (CII).

NBFCs are facing the heat of a crisis at IL&FS, which defaulted on repayment of its commercial paper dues, leading to a contagion effect in the sector.

"As per preliminary assessments, there is no liquidity or asset liability mismatch seen in NBFCs," said Varma.

While the bank does not see any need to put on hold the existing lines of credit to NBFCs, it might be conservative in fresh exposure to NBFCs with a not-so-strong credit profile in the near future, according to Varma.

Ruling out ‘systemic risks’ or any fear of liquidity crisis, he said the bank will continue to lend to the sector.

After several quarters of muted corporate sector growth, SBI is expecting an uptake in corporate lending in the coming months. SBI expects its corporate loan book to grow nearly six per cent in FY19 over the last year, with overall lending growth at around 10-12 per cent.

Corporate loans, which accounted for nearly 70 per cent of its total advances till about three years back, have shrunk and are now down to near-40 per cent. Corporate lending growth is expected to be driven by PSUs and private investments in sectors such as automotive, oil and gas etc, said Varma.

“There is a general pick-up in credit demand from the corporate sector. The resolutions happening through IBC (Insolvency and Bankruptcy Code) will further help improve incremental credit demand to the sector,” he said.

Further, with some of the stressed accounts expected to be resolved, the bank expects working capital needs in sectors like steel to aid an increase in corporate lending.