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BW Businessworld

Leading The Recovery

Under the stewardship of its Chairman and MD Rajnish Kumar, country’s largest lender State Bank of India is on a roll turning around across key parameters

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Rajnish Kumar, Chairman, State Bank of India

In May 2018, Rajnish Kumar had publicly announced that State Bank of India would report profits in the first half of financial year 2018-19. Why was this statement important? Because country’s largest lender had been reporting losses in the last two financial years. When the results for the full financial year was announced in May, SBI reported a profit of Rs 862 crore. The numbers may not impress experts but consider this: SBI had posted a net loss of Rs 6,547 crore in FY18 and Rs 1,805 crore in FY17. Kumar is confident and says that by March 2020, SBI won’t have any past legacy in the corporate book. Here he is referring to the issue of non-performing assets or NPAs dogging the Indian banking system at large including major public sector banks.

Sixtyone-year old Kumar, who has been SBI Chairman for the past couple of years having joined it as a Probationary Officer in 1980, says that 2019-20 will be a turning point for SBI as the bank will direct its efforts to achieve a more sustainable mix of business, domestically and in overseas operations. And we don’t doubt a bit. Speaking to BW Businessworld a few days ago, Kumar described his journey at SBI as ‘exciting’. “The journey has been exciting because at SBI continuity and change go hand in hand. We have seen preparations in terms of provisioning, recognition and cleaning up of the balances sheets. It is now a lot cleaner and healthier,” he said. “Our NPA—gross and net NPA—has come down substantially and is very much within manageable limits,” he said. And the numbers reflect that too. SBI’s asset quality improved in FY19 with gross non-performing assets (NPAs) ratio — bad loans as a percentage of gross advances — declining to 7.53 per cent versus 10.91 per cent in the previous year. Net NPA also fell to 3.01 per cent as compared to 5.73 per cent in the corresponding period last year.

Kumar further expands on the NPA issue. “Corporate NPA and retail NPA have to be seen in a different light and the problem was more on the corporate side for us. The retail NPA is around 3 per cent and that is steady without any huge variation. Our net corporate NPA is Rs 34,000 crore out of which Rs 27,000 crore is considered as returnable. So what we need to do is provide another 14,000 crore which is not much of an issue for us,” he said.

Looking Ahead
Taking cues from the last year, SBI eyes a credit growth of 10-12 per cent in FY20. “To an extent the credit revival and recoveries in FY19 have already set the tone and the bank is confident of achieving the target for FY20,” Kumar wrote to the shareholders in the latest annual report. He said it was envisaged last year that growth in business will be achieved by portfolio re-ordering to reduce the credit risk-weighted assets (RWA) to total advances ratio and internal reorganisation of the corporate banking. “My message this year highlights the progress in the revival strategy,” he said.

According to Kumar, a sustainable recovery requires deep structural transformation and strategic shifts in portfolio. Such an exercise, he said, should ultimately improve the return on asset (RoA), minimise asset liability mismatches and reduce the payback period of our investments.

“Accordingly, our transformation strategy going forward will continue to focus predominantly on five areas: customer service, corporate credit revamp, digitisation of banking operations, synergy between subsidiaries and development of our human resource,” said Kumar. The use of technology in delivering banking services has become more broad-based, he said. “The bank is already in leadership position in digital channels, ATMs and mobile banking. Asset and liability side product offerings through the YONO platform will be scaled up.

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