State Bank of India (SBI) is aiming to cut its bad loans pile by about ₹50,000 crore and make upfront provisions in FY2019 to strengthen its balance sheet.

Rajnish Kumar, Chairman, SBI, expects the gross non-performing assets (GNPAs) of India’s largest bank to decline to about ₹1,72,000-1,80,000 crore as of March-end 2019 from ₹2,23,427 crore as of March-end 2018.

“Out of the GNPAs (as of March-end 2018), ₹78,000 crore is on account of large stressed accounts from NCLT (National Company Law Tribunal) List 1 and List 2 alone.

“So, I believe this year it will all be out (these accounts are either resolved or liquidated). Further, the stress we are seeing in the corporate and retail book is within our tolerance limits. So, definitely there will be a decline in GNPAs,” Kumar told BusinessLine .

NCLT resolutions

As per the bank’s assessment, the bulk of the resolutions in the NCLT List 1 (of 12 large stressed accounts) will go through in the first half of FY2019 and the NCLT List 2 (of 28 accounts) is likely to be resolved by the end of FY2019.

In FY18, SBI reported fresh slippages of ₹94,781 crore (₹1,10,247 crore in FY17).

As per the bank’s annual report, the rising NPA levels and fresh slippages across sectors can be attributed, among others, to less-than-adequate pick-up in domestic growth and declining exports; stress in steel, power sectors, textiles, telecom, sugar and aviation; and delay in execution of infrastructure projects and related escalation of costs.

Referring to enforcement of the Insolvency and Bankruptcy Code (IBC) for resolution of stressed/NPA borrowers, the revised framework for resolution of stressed assets and awareness among businessmen that they have to be careful (read: banks will not tolerate non-payment on due date), Kumar observed that this should all lead to a decline in NPAs.

“But we should also get a little bit of help from the macro-economy. If the economy grows at 7.7 per cent (the GDP growth clocked in the March 2018 quarter), there is revival in many sectors – for example, we have seen revival in steel and cement,” explained the SBI chief.

Kumar said there will be more upfronting of provisions so that net non-performing assets will also come down.

SBI’s provision coverage ratio (PCR) improved to 66.17 per cent as on March 2018 from 61.53 per cent as on March 2017.

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