NPA over­hang may go in first half of next year: SBI

Newly-formed as­set man­age­ment firm aims to re­solve as­sets worth ₹3-lakh crore

The Hindu Business Line - - NEWS - M RAMESH

The State Bank of In­dia ex­pects the NPA over­hang in the bank­ing sec­tor to “dis­si­pate in the first half of 201920,” said the bank’s Man­ag­ing Di­rec­tor (GB & S), Di­nesh Ku­mar Khara.

Speak­ing here at a func­tion or­gan­ised by United Way, Khara said Sashakt As­set Man­age­ment Com­pany, the newly-formed as­set man­age­ment com­pany for res­o­lu­tion of stressed as­sets, would help in the res­o­lu­tion of “about a thou­sand as­sets worth about ₹3-lakh crore”.

He also ob­served that with the bad-loan prob­lem getting solved, many pub­lic sec­tor banks would come out of the PCA frame­work (a ref­er­ence to ‘prompt cor­rec­tive ac­tion’, Di­nesh Ku­mar Khara, Man­ag­ing Di­rec­tor (GB & S), SBI

a set of RBI rules that trou­bled banks should fol­low in or­der that they don’t go bust).

As a re­sult, banks would be in a po­si­tion to lend more, which would help eco­nomic growth.

The bank­ing sec­tor started ex­pe­ri­enc­ing stress af­ter the de­cel­er­a­tion in de­mand in 2016.

Im­pact on bal­ance sheets

How­ever, the As­set Qual­ity Re­view (AQR) ex­er­cise and the RBI cir­cu­lar of Fe­bru­ary 2018 (which man­dated in­sol­vency pro­ceed­ings for debt de­fault be­yond 180 days) ac­cel­er­ated the stress on bank bal­ance sheets. De­posits and ad­vances mod­er­ated and banks were pulled into losses, Khara said.

NPA ra­tio crossed the 11-per cent mark in 2018, and only af­ter the In­sol­vency and Bank­ing Code came into force could the banks chan­nelise their en­er­gies to­wards re­cov­ery of loans

Khara said that the AQR ex­er­cise (which looked at how good each loan as­set was) was “a great learn­ing op­por­tu­nity for the bank­ing sys­tem”.

They could un­der­stand what risks they had un­der­taken with­out re­ally mea­sur­ing them.

How­ever, he added that “the strong re­vival in credit growth wit­nessed in the sec­ond half of 2018-19 sug­gests that an over­all im­prove­ment in the health of the banks is on the cards.” On the ru­pee de­pre­ci­a­tion, Khara ob­served that the fall in the value of ru­pee against the dol­lar was rather sur­pris­ing con­sid­er­ing that the In­dian econ­omy has been grow­ing con­sis­tently in the last five years and the FDI in­flow has been good — around $30-35 bil­lion a year — in the four years upto 2018. This per­haps in­di­cate that the mar­ket gives more weigh­tage to oil prices, he said.

He said that bond yields were also mov­ing both ways, ris­ing with in­crease in crude prices and also cor­rect­ing.

For­eign ac­tiv­i­ties

On the ex­ter­nal front, Khara said that In­dia would face head­winds from the trade war be­tween the US and China and a ‘no-deal’ Brexit.

The waiver given to In­dia for trad­ing with Iran and the US troops with­draw­ing from Syria and Afghanistan would also have an im­pact, he said.

Trucks stranded on the Sri­na­gar-Jammu Na­tional High­way in Qazi­gund, south Kash­mir on Sun­day. The High­way re­mained closed for the fifth con­sec­u­tive day, amid ef­forts to re­store the only road con­nect­ing Kash­mir with the rest of the coun­try NISSAR AH­MAD

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