The country's largest lender, State Bank of India, on Thursday said its farm loan portfolio has witnessed a rise in defaults due to plans for an agriculture debt waiver scheme in Telangana and Andhra Pradesh.
"The payment discipline has been vitiated due to plans to waive off loans. At present, defaults are restricted only to these two States and hope it does not spread to other regions. The rise in defaults was not due to drought conditions," SBI Chairperson and Managing Director, Arundhati Bhattacharya, told reporters after its annual general meeting on Thursday evening.
Her comments come when asked about the impact of Telangana Chief Minister K Chandrasekhara Rao’s statement a few weeks ago proposing farm loan waivers, which could run into over Rs 1 lakh crore in Andhra Pradesh and Telengana.
Commenting on overall pressure on asset quality, the SBI chief said stress in the system was lessening now and the overall numbers should start looking better.
Asset sale to ARCs
The bank has sold non-performing assets (NPAs) worth Rs 3,000 crore in the quarter ended June 30, 2014. SBI would continue to offload NPAs in each quarter and may sell around Rs 3,000 crore more of bad loans to ARCs in this quarter.
Gross NPAs of the bank stood at 4.95 per cent at the end of March 31, 2014, up from 4.75 per cent a year ago.
The bank's year to date loan growth is around 13 per cent and it is targeting a growth of 15-16 per cent in FY15.
"I continue to stick to it (15-16 per cent loan growth in FY15) because even though we are hoping that growth will come back, but for it to translate into credit books of the bank will take time. Maybe, in the last quarter we may see substantial pick up, and if not, definitely in the first quarter of the next year," Bhattacharya said.
No capital raising
Asked about capital plans, she said the bank is well capitalised at 12.44 per cent now.
"I have a lot of room in additional tier 1, tier II. Regarding the common equity tier 1, I can look for rights issue or follow-on or a QIP. So, all of them are on the table. But at this point capital is not of a very primary importance," Bhattacharyya said.
In 2013-14, the bank had raised equity capital of Rs 8,032 crore through qualified institutional placement (QIP). The government had also infused Rs 2,000 crore in the bank.