State Bank of India plans to cut interest rates by 2 to 5 percentage points for the SME (small and medium enterprises) sector.
The bank's Chairman, Mr Pratip Chaudhuri, said it wants to focus more on this sector in order to bring about some balance between its SME loan portfolio and home loan portfolio.
At present, the interest rates for the SME sector hover in the range of 12-17 per cent and this will be brought down to 10-12 per cent, he said. The new interest rates will come into force from the first week of June, he said.
Currently, the SME portfolio, at Rs 80,000 crore, accounts for 12-14 per cent of the total advances of the bank.
Taking a cue from the Union Finance Minister's advice on NPA management, SBI will also beef up its Stressed Asset Management Group. Last year, the group managed to register cash recovery of Rs 1,000 crore, “the highest ever recorded by the bank”, he said.
The group has around 400 people working from nine branches – meant exclusively for stressed asset management.
According to him, the bank will bring its net NPA to 1.62 per cent during the current financial year from 1.82 per cent.
The bank is also advising its borrowers to consider restructuring, “in case it is required, before default”. He said most of the stressed assets are related to export houses, again predominantly in the textile industry.