Banks' loans to State Electricity Boards (SEBs) are standard assets as State Governments have been making good any shortfall in repayments from their budgetary allocations, said Mr M.D. Mallya, Chairman, Indian Banks' Association, and the Chairman and Managing Director, Bank of Baroda.

However, reforms such as increase in electricity tariffs are needed to improve the overall profitability of these SEBs, he said while speaking on the sidelines of a press conference to announce the FICCI-IBA banking seminar.

On the issue of supply of coal to electricity companies, Mr Mallya said while it was not a concern yet, going ahead with it could pose a challenge in ensuring continued supply.

SME sector

On another issue, Mr Mallya said Indian banks operating overseas would not face any impact of the current global uncertainty as these banks have exposure only to Indian corporates operating overseas and India-related trade.

Mr M.V. Nair, Chairman and Managing Director, Union Bank of India, said that the decision to pass on higher interest rates to borrowers would depend on individual banks.

But the rising rates might impact the margins of small and medium corporates, he added.

According to a report by FICCI-IBA and the Boston Consulting Group, the non-performing assets management processes at banks need major overhaul.

Some banks have alarmingly high levels of non-performing assets in relatively safe products, like home loans.

Banks with smaller market share in home loans had higher incidence of non-performing assets, Mr Saurabh Tripathi, Partner and Director, Boston Consulting.

Tech spending

Other observations in the study include lesser spending by public sector banks in technology with spends at about 25 per cent of global benchmarks and significantly lower variable pay at 2 per cent of fixed compensation.

“Long overdue, the public sector urgently needs an adjustment in its compensation structure,” the report said.

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