The mood at India’s largest bank — State Bank of India — has turned very cautious, especially in the last three months.
The bank is unwilling to consider risky proposals and is turning down requests from corporates with a rating of BB and below. “The objective is clear and it (SBI) doesn’t want to take on any fresh surprises from here on,” said a highly placed source.
“The only thing when we do underwriting is we should see that it should suit our appetite. Appetite is not in terms of how much NPA we can have; it should rather be how much lower NPA we should have,” said Dinesh Khara, Chairman, SBI, while addressing the media on November 5.
“We should identify the risk and have the mitigations in place. And as long as we’re in a position to do that, we will not like to touch the credit which is not in line with our risk appetite,” he added.
Khara’s three-year tenure as SBI chairman ends on October 23, 2023.
Corporate loan exposures
Meanwhile, the bank is also tightening its noose on some of its existing corporate loan exposures. Sources said companies seeking refinancing or credit limit enhancements aren’t having it easy with the bank, that too if their credit rating is BBB or lower.
“A lot of questions are being asked as to why these companies are seeking additional credit enhancement and if they are due for a rating upgrade, SBI prefers to see if the upgrade is coming through before it can increase its exposure to such accounts,” said a senior banker aware of the matter.
SBI has increased the share of corporate loans with A and above rating from 58.5 per cent in FY19 to 81 per cent in Q2 FY23 and it wants to maintain the corporate loan book mix at these levels.
Also, with its gross and net NPAs at 3.52 per cent and 0.8 per cent, respectively in Q2 FY23, which is the best level since FY02, efforts are on to ensure that SBI doesn’t take on risky proposals which could jeopardise its position in 3-5 years.
“This is the briefing given to every senior member in the leadership team,” said a banker privy to the development.