State Bank of India is reviewing its exposure to non-banking finance companies (NBFCs).

According to Sujit Kumar Varma, Deputy Managing Director, Corporate Accounts Group, SBI, this is an ongoing process. “As per preliminary assessments, there is no liquidity or asset-liability mismatch seen in NBFCs,” he said on the sidelines of a banking seminar organised by CII in Kolkata on Friday.

However, the review assumes significance in light of the IL&FS incident, where the company defaulted on repayment of its commercial paper dues. The subsequent and sharp downgrading of IL&FS’s ratings had a contagious effect, leading to massive selling of NBFC stocks on fears of a possible liquidity crisis.

The review process is expected to be completed in the next fortnight. SBI has around ₹2 lakh crore of exposure to NBFCs, a majority of which are into housing and other retail finance. Ruling out any ‘systemic risks’ or fear of liquidity crisis, Varma said that the bank would continue to lend to the sector, moving forward.

Corporate loan growth

The bank is expecting its corporate loan book to grow by nearly 6 per cent in FY19, compared to the same period last year. Its advances to the corporate sector had grown by close to 3 per cent in FY18.

Corporate loans, which accounted for nearly 70 per cent of its total advances till two-to-three years back, has shrunk and is now down to close to 40 per cent. However, credit offtake by the corporate sector is expected to pick up, primarily driven by PSUs and private investments into sectors such as automotive, oil and gas, and others, he said.

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

Credit review mechanism

According to Khara, about two months back, the bank had introduced an intermediary credit review mechanism to ‘critically review’ credit proposals.

It is hopeful of recovering around 53 per cent of its exposure to the first list of 12 stressed accounts referred to the NCLT for corporate insolvency resolution.

“We have made adequate provisions for this and it will not impact the balance sheet. Our average provisioning for these cases would be around 55 per cent,” Khara said.

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