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The telecom sector continues to be under stress and the State Bank of India is making extra provisions for this, according to the bank’s Chairperson Arundhati Bhattacharya.
“Telecom has already been earmarked as a sector going through stress and provisioning has been done,” Bhattacharya said while responding to queries on whether the Telecom Regulatory Authority of India’s (TRAI) decision to reduce interconnect usage charges (IUC) will impact the finances of operators such as Idea, Vodafone and Bharti Airtel.
TRAI has reduced IUC — paid by telecom companies for calls originating from their network and terminating in other networks — to 6 paise per minute from 14 paise, effective October 1.
India Ratings and Research, in a recent report, said the reduction in IUC will have a 4-5 per cent impact on the EBITDA levels of incumbents such as Bharti Airtel, Idea and Vodafone India. However, this could help newcomer Reliance Jio to save ₹35-40 billion in IUC annually.
Leadership training“We do not know how their (incumbent telcos’) finances will be impacted,” said Bhattacharya, who was here on Saturday to inaugurate the State Bank Institute of Management. The institute, which will impart leadership training to middle-level banking professionals, will have an initial capacity of 240 students.
According to Bhattacharya, NPAs (non performing assets) have almost bottomed out and slippages have come down.
“NPAs have probably reached the end of the cycles and slippages are down. However, there are new sectors like telecom that are showing stress. But even then it is not the same as it was, say, two years back,” she said.
While the Centre and State governments have to do some more “heavy lifting” and push infra spends, several projects across sectors like roads, railways, petroleum, fertilisers and so on are coming up, pointed out Bhattacharya.
“We will see demand coming up and that will spur investment. The results will come over a period of time,” she added.
Calling GST a deep-rooted structural reform, Bhattacharya said its positive impacts will be felt over the long term. Short-term pain is a given when such reforms are rolled out, she added.
“GST is a deep rooted structural change. It can cause short-term pain. But you need to see the outcome over the long term. You cannot see everything in order in 90 days,” she said, adding that the “economy needs to formalise” for better results.
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