Rajnish Kumar, chairman of State Bank of India, told shareholders at the lender’s 65th Annual General Meeting on Tuesday that the current year would be a challenging one as the Covid-19 pandemic was still playing out.
“However, the bank is well prepared to deal with such challenges as most of the legacy stress issues have been addressed and provided for. Even as the current economic conditions are expected to put pressure on SBI’s asset quality, the bank’s effort will be to maintain record profit,” he said.
In FY20, SBI’s net profit stood at Rs 14,488 crore, highest in the history of the bank. Despite the anaemic credit growth of 3.75% in the domestic market last year, SBI expects to exit FY21 with a credit growth of 8%, as it seeks to attain leadership position across digital channels. Kumar said, “This year we are targeting loan growth of 8%. Earlier, our target was higher, but due to Covid-19, we have done some re-assessment and moderated loan growth target.” The bank is also targeting net interest margins (NIMs) of around 3.2% in the current financial year.
The bank intends to maintain its capital adequacy ratio above the mandated regulatory requirement of 12.1%. Kumar said the bank would attempt to maintain capital adequacy ratio 1% above regulatory requirement of 12.1% from October 1. The capital adequacy ratio of SBI stood at 13.06% till March. The bank took shareholders’ approval at AGM for an enabling resolution to raise Rs 20,000 crore. He specified that no definite time band had been decided to raise capital yet.
On asset quality, Kumar said net NPAs were consistently showing downward trend. The bank’s gross NPA ratio declined to 6.15% from 7.53% in FY20 and provision coverage ratio improved to 83.62%. On the recoveries front, the lender is keen to repeat previous year’s performance in the current financial year, said Kumar. In 2019-20, the bank’s total recoveries stood at Rs 22,389 crore in NPA accounts and Rs 9,250 crore in written off accounts.
Using the current pandemic as an opportunity to cut costs, the bank seeks to make savings of Rs 1,000 crore from its work from anywhere (WFA) infrastructure. The bank will remain focused on cost reduction, rationalisation and reskilling of workforce — improving staff productivity and redeployment of workforce from admin offices to sales roles. “The bank will maintain a constant vigil on the emerging stress and take proactive action to help our borrower customers and maintain asset quality. An elaborate business continuity plan (BCP) is already in place,” the SBI chairman said.
While plenty of risks could emanate from the ongoing crisis, SBI is also using the Covid-19 pandemic as an opportunity to focus on technology and digital banking channel. The country’s largest lender is eyeing digital leadership across channels, as it readies to leave its legacy issues behind in a post-Covid world. Kumar said mobile banking app of the bank, YONO, had already achieved sizeable growth and the bank wanted to scale it further.
“Bank will further scale up YONO and has set a target of doubling user registrations in the next six months,” Kumar said, adding that the bank would further strengthen platform through new product offerings like end-to-end home loans, pre-approved car loans and personal gold loans. SBI chairman also spoke on using technology in non-performing asset (NPA) management. “The bank intends to bring technology in NPA management such as litigation management system (LITMAS) for better monitoring of legal recourses undertaken for expediting recovery in the stressed accounts,” he said.
The SBI chairman said cash flow-based lending models would be used, leading to efficient financing that would help lower the delinquency. FE had earlier reported that SBI would shift to cash flow-based lending from April 1.
Rajnish Kumar said bank expected ‘decent’ return from Yes Bank investment in three years, on a query about putting money in the private bank. SBI had invested Rs 6,050 crore in Yes Bank at Rs 10 per share for a total stake of 48.21% in the private lender. SBI also plans to invest up to Rs 1,760 crore in Yes Bank’s forthcoming follow-on public offer (FPO), which will open from Wednesday.