SBI exploring ways to declare Vijay Mallya 'wilful defaulter'

State Bank of India, which has an exposure of Rs 1,600 crore to grounded airline Kingfisher, today said it is exploring ways to declare the carrier's promoter Vijay Mallya as a 'wilful defaulter'.

"We are looking at various ways to declare Vijay Mallya a wilful defaulter and trying build a strong case in that regard," an SBI source said.

The source said that as per RBI guidelines, it would have to be proven that the borrower had diverted funds which he taken from the bank and not paying up despite having the ability to pay.

"If we are sure on these two points, then the bank will declare Mallya a wilful defaulter," the source said.

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http://www.financialexpress.com/news/sbi-exploring-ways-to-declare-vijay-mallya-wilful-defaulter/1253716

Kingfisher should infuse Rs 2,000 crore for revival: SBI chief

http://www.thehindubusinessline.com/industry-and-economy/banking/kingfisher-should-infuse-rs-2000-crore-for-revival-sbi-chief/article4332672.ece

Kingfisher Airlines needs to invest at least Rs 2,000 crore to restart its operations, said one of its lender SBI’s Chairman Pratip Chaudhuri.

SBI is the lead banker in the 17-lender consortium that extended Rs 7,000 crore loans to the now grounded Kingfisher Airlines. The state-run bank has an exposure of Rs 1,500 crore to the carrier. The debt has not been serviced since January, 2012.

To a question, Chaudhuri also said right now SBI is not contemplating any legal action against the carrier as the door for negotiations is still open.

“In order to restart operations, Kingfisher Airlines needs to infuse at least Rs 2,000 crore as capital. We are still holding talks with the company and following up also,” Chaudhuri told reporters here.

Chaudhuri said the bank was holding talks with the carrier every week.

If necessary, some buildings and non-core assets might be disposed, he said.

Kingfisher is saddled with mounting losses and debts. It has been grounded since October 1 following strike by pilots over non-payment of salaries. The airline’s licence has also been temporarily suspended and aviation regulator DGCA has told the airline that it will be restored only when it submits a revival plan.

As per the revival plan submitted to DGCA last year, Kingfisher had said it would require about Rs 652 crore over the next 12 months for running its operations.

RBI may hike NPA provision ratio if needed: K C Chakrabarty

http://www.indianexpress.com/news/rbi-may-hike-npa-provision-ratio-if-needed-k-c-chakrabarty/1042638/0

RBI Deputy Governor K C Chakrabarty has come down heavily on banks showing higher profits without providing adequately for bad loans, and said if need be, the central bank may hike provision coverage ratio (PCR) levels.

"Why banks need to show profits as high as 25 per cent? They can show 5 per cent growth in their profits. If they are not doing (providing more), I will increase it (PCR)," he said.

The RBI had done away with its earlier requirement of forcing banks to maintain the PCR, or the ratio of provision to gross non-performing assets (NPAs), at 70 per cent.

The apex bank had increased the PCR to 70 per cent after the Lehman crisis in 2008 and this was applicable till September, 2011. While almost all private banks have higher PCR, majority of the state-run lenders could not meet this deadline.

A number of public sector banks, especially the smaller ones, have shown a drop in PCR in the second quarter earnings and posted a good jump in profits as a result.

Speaking about NPAs of banks, Chakrabarty attributed a majority of them to poor administration and risk management practices of lenders and went to the extent of terming it as 'non-performing administration.'

"I call NPA as non-performing administration. We have to make the administration functioning," Chakrabarty, who oversees banking supervision at RBI, said.

Lending rates would have been far lower if banks had got their NPAs down, Chakrabarty said.

"It is a burden on the people who are paying the money. People forget that if NPAs would have been 1 per cent, banks' lending rates would have been 4 per cent lower with the same inflation, and same repo rate.

"That's why we should tackle NPAs -- not only for the survival of the system, but also for the survival of the customer," Chakrabarty said.

According to RBI data, the gross NPA ratios of the public sector banks stood at 3.3 per cent for the fiscal ended March 2012, up from 2.4 per cent a year ago, while the same for private lenders dropped to 2.1 per cent from 2.5 per cent.

A recent report by rating agency Icra warned the bad assets book of banks are set to cross Rs 2 lakh crore mark, or about 3.8 per cent of the total asset book, this fiscal.

Similarly, the report said the uncovered NPAs or net NPAs, despite the higher credit provisioning, increased from 1.1 per cent at end March 2011 to 1.5 per cent at end June 2012.

This led to an increase in net NPAs in relation to net worth from 10.5 per cent at the end of March 2011 to 14.4 per cent at the end of June 2012.

Chakrabarty said although the RBI is not worried about NPAs at present, "that does not mean we should be complacent."

"Banks should improve their credit management, the follow-up skills, recovery skills, and their systems which must help them in recovery," Chakrabarty said.

On the rising cases of corporate debt restructuring (CDR) in the current round of economic gloom, he said there is nothing bad with the method "if CDR can give life to the borrower".

"If the banks do an appraisal, re-appraisal and they are happy that the unit can come out then only restructure. Otherwise, (its) better for the account to die," he added.

"CDR is not a concern, CDR converted into an NPA is a concern," Chakrabarty said.

Kingfisher loans: Banks hope for ‘amicable solution’

http://www.thehindubusinessline.com/industry-and-economy/banking/kingfisher-loans-banks-hope-for-amicable-solution/article4167725.ece

State Bank of India, the leader of the consortium of banks that have lent to the grounded Kingfisher Airlines, on Wednesday said the banks are trying to do everything possible to find an amicable solution to the carrier’s financial troubles.

“They (KFA) have created a brand value, they are a good company and we are trying to do everything so that an amicable solution to the problem is found,” said Diwakar Gupta, Managing Director and Chief Financial Officer, SBI, on the sidelines of a PwC event.

The Bangalore-based airline owes about Rs 7,000 crore to a consortium of 17 banks. KFA owes about Rs 1,500 crore to SBI. The cash-strapped airline has accumulated losses of nearly Rs 10,000 crore.

SBI Chairman Pratip Chaudhuri had asked the airline management to infuse at least $1 billion by November 30 for reviving the airline. If this had come through, banks would have considered lending afresh or recasting their existing loans to KFA. However, the airline promoter has not brought in his equity contribution so far.

Since its inception in 2005, the airline has not reported any profit. The losses of Kingfisher Airlines widened to Rs 754 crore for the September quarter this fiscal as compared with Rs 469 crore in the year ago period.

The airline has been grounded since October 1, following a strike by its pilots and engineers over non-payment of salary. Consequently, the Director General of Civil Aviation suspended the airline’s flying licence on October 19. The airline officials have not been able to sort out regulatory issues that are imperative for it to resume operations.

In a further blow to the beleaguered airline, the cash-strapped carrier may have to vacate the space it occupies at Mumbai Airport. The Mumbai airport authorities may issue an eviction notice after the grounded carrier failed to respond to an earlier notice asking it to clear the Rs 22 crore dues towards parking and navigation charges.

We’re yet to hear from Kingfisher: SBI chief

http://www.thehindubusinessline.com/industry-and-economy/banking/were-yet-to-hear-from-kingfisher-sbi-chief/article4130354.ece

With barely a week left ahead of the November 30 deadline set by bankers to pump in fresh capital into the grounded Kingfisher Airlines, State Bank of India (SBI) today said it has not heard from the company so far.

“Kingfisher as a company has not given us any information or visibility on capital infusion,” SBI chairman Pratip Chaudhuri told reporters on the sidelines of the annual two-day banking summit `Bancon 2012’ here.

In an obvious reference to the United Spirit—Diageo deal earlier this month, he said there are reports relating to the group company, but that cannot be a basis for taking a view on the airline.

Late last month, SBI set a November 30 deadline for Kingfisher to bring in fresh capital and produce a comprehensive revival plan.

But the airline chairman Vijay Mallya said later that he had no knowledge about any such deadline.

On the day United Spirits sold majority stake to the English liquor major Diageo for over Rs 11,100 crore, Mallya had hinted that the proceeds would not be diverted to the troubled airline, saying “both businesses will be dealt with separately“.

The SBI chairman had earlier this week categorically ruled out fresh funds to the airline, which has not been servicing its Rs 7,000-crore working capital and long-term loans taken from 17 banks since January this year.

Banks have been demanding that Kingfisher management pump in at least $1 billion of fresh equity.

Deccan Chronicle owes banks Rs 1,090 cr

http://www.thehindubusinessline.com/industry-and-economy/banking/deccan-chronicle-owes-banks-rs-1090-cr/article4123737.ece

Seven public sector banks have a total exposure of Rs 1,090 crore in Deccan Chronicle Holdings Ltd as on September 30.

However, among these seven, Canara Bank is the only bank where the account has turned into a non-performing asset (NPA). Giving this information in a written reply in Rajya Sabha on Thursday, Minister of State for Finance Namo Narain Meena said, “As against the same (total exposure), they held security of value Rs 1,469.04 crore.” Canara Bank has the highest exposure to Deccan Chronicle with Rs 350 crore, which the bank has classified as an NPA.

“Banks are closely monitoring their loan portfolio and making all out efforts, as per the Reserve Bank of India guidelines in vogue, so that their loan amount does not turn into NPA,” Meena said.

The Hyderabad-based publisher of English daily Deccan Chronicle is in the news for the liquidity crisis it is faced with and lenders initiating a series of cases, including a winding-up petition by one of the lenders. The company-promoted Indian Premier League franchise team Deccan Chargers, which represented the team from Hyderabad, has been removed from the league by the Board of Control for Cricket in India for failure to meet obligations such as providing bank guarantees.

The efforts of the Deccan Chronicle management to sell the team did not materialise. The Hyderabad franchise was recently bagged by Sun TV.

Kingfisher - Banks should have acted tougher with the airline

http://www.business-standard.com/india/news/the-kingfisher-exemption/489070/

On October 5, the Directorate General of Civil Aviation, or DGCA, finally wrote to the troubled Kingfisher Airlines, asking it to show cause why its licence should not be revoked. Kingfisher’s employees, many of whom have not been paid for seven months, are currently on strike; the company itself has declared a lockout till October 12. 

The company’s share price, already low, has lost another quarter of its value. And last week Pratip Chaudhuri, chairman of State Bank of India (SBI), said there was “no more room” for bank loans to Kingfisher. It certainly looks like the end of the road for the airline — but is it? Its owners and management continue to insist that a revival plan is just around the corner, and it is reported that some online portals are selling tickets on the airline from October 13 onwards.

Kingfisher is emblematic of a problem with Indian capitalism: the way companies with well-connected promoters can last much longer than they should, soaking up the system’s resources in the process. 

Kingfisher should probably, on purely economic grounds, have shut down two years ago. Its business model had been shown up as unworkable well before then, and it was clear that the management and owners were incapable or unwilling to change it. Yet banks, especially public sector banks, threw good money after bad into the airline. 

Kingfisher owes Rs 7,000 crore (in principal alone) to 17 lenders; they are now non-performing assets for, in particular, SBI, Bank of Baroda, Bank of India and Punjab National Bank. The banks are concerned that they will get just a fraction of this money back. If they were not scared, would they be so desperate to keep a company alive that should so obviously be shut down?

Clearly, the banks had lent too much — and, given that the company in question is owned by a member of Parliament, questions must be asked about those decisions. Banks should be conservative with their depositors’ money, and that they chose to raise their stake in a large, troubled company in a risky sector – after paying a hefty premium of 70 per cent on the share price – needs further explanation. 

The kid gloves with which Kingfisher has been treated are visible, too, in the puzzling silence over whether its owner and management are criminally liable, under Section 405 of the Indian Penal Code, for defaulting on payments to their employees’ provident funds. 

Given that many of the promoters’ assets are pledged, including the Kingfisher brand itself, the airline’s creditors should have been able to force a result to their liking. Instead, they have delayed the inevitable, at great cost to their depositors, Kingfisher’s employees, the aviation sector and perhaps even the systemic stability of India’s financial sector. True, Reserve Bank of India Deputy Governor K C Chakrabarty denied on Monday that any systemic risk was posed by bank lending to Kingfisher. 

It is certain, though, that unless the lessons of this episode are learned, and banks are more ruthless even with well-connected enterprises, systemic troubles from bad debts are inevitable

SBI says NPA rating to be better by March

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/sbi-says-npa-rating-to-be-better-by-march/articleshow/16770724.cms

A day after S&P downgraded its credit rating over asset quality concern, State Bank of India (SBI) today said it is hopeful of improving its bad assets ratio by the end of the fiscal. 

"Ultimately when it comes to FY13, we will be able to project a better position of NPAs (non-performing assets) than what has been seen till Q1," SBI managing director and group executive for national banking A Krishna Kumar told reporters. 

He also denied there would be any impact of the downgrade on the operations, saying the downgrade forms only a small portion of the bank's overall rating. 

"The SACP (stand-alone credit profile) is a part of the overall rating exercise. The SACP is an integral part of the issuer credit rating. In fact, there are other components like capital position, liquidity and earnings, and those remain strong as far as S&P is concerned," Kumar said. 

Retaining the overall issuer credit rating at BBB-, Standard &Poor's had yesterday downgraded the SACP of SBI to BBB- from BBB citing poor asset quality, making it the second agency to downgrade SBI after Moody's within a year. 

"The recent rating review would have absolutely no impact on the operations of the bank...so any impact in terms of probably cost of borrowing abroad will not be there because the rating is exactly the same," Kumar said. 

The bank had posted a record gross NPA of 4.99 per cent or a little over Rs 40,000 crore in the first quarter, despite a record profit of over Rs 3,500 core. 

Deputy managing director for stressed assets management Soundara Kumar pointed out that bank's restructured assets are lower than the peers and the gross NPA plus the restructured assets are at 8-9 percent of the total assets book, which is on par with that of the peers. 

A downgrade by Moody's came as a jolt to the bank, wrecking the share prices. Bank chairman Pratip Chaudhuri had said it would ask the agency to reconsider it but Kumar today said there is no progress on it.

Kingfisher Airlines not a systemic risk: KC Chakrabarty

http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/kingfisher-airlines-not-a-systemic-risk-kc-chakrabarty/articleshow/16727690.cms

The debt-laden Kingfisher Airlines, which owes 17 banks about Rs 7,000 crore, does not pose any systemic risk, RBI Deputy Governor K C Chakrabarty said today. 

When asked about the troubles at Kingfisher Airlines, Chakrabarty said that "it does not pose any systemic risk to the banking system". 

He was talking to reporters on the sidelines on an SME event organised by the Bombay Chamber of Commerce and Industry here. 

The aviation regulator DGCA had recently served a show-cause notice to the company asking why its licence should not be revoked. 

Within the lenders consortium, SBI has the single largest exposure with Rs 1,580 crore, followed by IDBI Bank (Rs 720 crore), Punjab National Bank (Rs 435 crore), Bank of India (Rs 575 crore), Bank of Baroda (Rs 530 crore), Central Bank of India (Rs 420 crore), UBI (Rs 350 crore), Corporation Bank (Rs 150 crore), and Federal Bank (Rs 80 crore which is not a loan but an en-cashed bank guarantee to BPCL).

Banks may have to write off Deccan Chronicle Holdings loans

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banks-may-have-to-write-off-deccan-chronicle-holdings-loans/articleshow/16718652.cms

Banks may be forced to write off about three-fourths of their Rs 4,000-crore loans to media company Deccan Chronicle Holdings due to skimpy collateral, and slow progress in the investigation into possible fraud due.

About two-dozen lenders, including Canara Bank, Axis Bank, ICICI Bank, Corporation Bank, and Yes Bank, are wrangling over what could be recovered from the once-sprawling media group that has fallen on bad times. 

"Even if we are able to recover funds from the sale of Deccan Chargers, the recovery could be just about Rs 1,000 crore," said a banker who lent money to the company but did not want to be identified. "This is also on the assumption that we are able to sell the cricket franchise." 

Lenders are in a fix as the main business of the company may be losing value fast and an early sale of its Indian Premier League cricket franchise Deccan Chargers looks unlikely as the Board of Control for Cricket in India and potential buyers have set stiff conditions.

A decision on admitting the company into the corporate debt restructuring cell may also get delayed since the headless Canara Bank, the lead bank, is unable to proceed with the forensic investigation into the company. The bank's chairman and managing director, S Raman, retired last month and the government is yet to appoint a successor. 

"The forensic audit is expected to take a month as the Canara Bank chairman and managing director has retired. The appointment of the new head is still pending," a senior public sector bank official in the know of the development said not wanting to be named. The CDR cell will discuss the matter in its meeting on October 19, said a person familiar with the developments. 

Canara Bank has lent Rs 330 crore to Deccan Chronicle Holdings and ICICI Bank has lent Rs 490 crore. Both have classified the loans as bad loans. Canara Bank officials did not comment and ICICI Bank did not respond to an email query. 

Recently, the Bombay High Court asked Deccan Chronicle to give an irrevocable and unconditional bank guarantee of Rs 100 crore to the Board of Control for Cricket in India on or before October 9. 

NPA levels in 2011-12 highest in 5 yrs: RBI

http://www.business-standard.com/india/news/npa-levels-in-2011-12-highest-in-5-yrs-rbi/488255/

Banks reject Kingfisher loan demand; SBI Caps to draw up fresh revival plan

http://www.thehindu.com/business/companies/banks-reject-kingfisher-loan-demand-sbi-caps-to-draw-up-fresh-revival-plan/article3942736.ece

Turning down a request for Rs.200-crore working loan by Kingfisher, the State Bank of India-led lenders consortium, on Thursday, asked SBI Capitals to chalk out a fresh revival plan for the cash-strapped airline in the next 2-3 weeks.

Kingfisher Chairman Vijay Mallya made a presentation at a meeting with lenders in Bangalore on Thursday, the first such meeting after the government’s policy decision to allow foreign airlines to invest in domestic carriers.

According to the lenders, Mr. Mallya did not offer any concrete revival plan as he could not commit on equity infusion by the promoters.

An official from a public sector bank said the lenders turned down a request from Mr. Mallya for an immediate working capital loan of Rs.200 crore. Since January, the airline has not been servicing its Rs.7,000-crore bank debt.

The official said the lenders had asked SBI Capitals to make a new revival plan, the third one, for the airline in the next 2-3 weeks.

Though the company suggested a second debt restructuring, nothing was finalised, a source said.

When asked whether banks were open to a second CDR in two years, the source said that would depend on the SBI Caps’ proposal.

The meeting comes amidst reports of the airline talking to prospective foreign airlines to offload its stake.

At the last meeting on September 3 in Mumbai, the bankers had demanded that Mr. Mallya should make the revival plan. This is the third time that SBI Caps has been asked to prepare a rejig exercise for the airline.

In 2010, it had made a debt recast plan for the airline, and, in November that year, its Rs.6,500-crore worth loan was recast.

Earlier this year, SBI Caps was asked to make another revival plan.

Meanwhile, the Bombay Stock Exchange, on Thursday, halved its circuit limits on shares of Kingfisher Airlines and group firm United Breweries Holdings, capping their maximum movement in a day at 5 per cent and 10 per cent, respectively.

The proposed changes, announced by the BSE through a circular and will be effective from Friday, follow a sharp rally in the share prices of the two companies in the past few days.

Earlier, Kingfisher shares were allowed an upward or downward movement of 10 per cent in a day, while the circuit filter limit for the group’s holding firm United Breweries (Holdings) was 20 per cent.

The exchanges generally lower the circuit filter of a stock as part of their surveillance mechanism to avoid excessive movement in the share price. Kingfisher shares, on Thursday, rose by 8.03 per cent to close at Rs.16.96 on the BSE, after touching an intra-day high of Rs.17.18 - its highest level in a month. The stock had gained 9 per cent on Wednesday as well, after Mr. Vijay Mallya said the air carrier was in talks with foreign airlines for possible stake sale.

UB Holdings had also gained nearly 11 per cent on Wednesday, although its share price settled only 1.85 per cent higher at Rs.146.05 in Thursday’s trade. Earlier in the day, UB Holdings had risen to as high as Rs.155.85 — its highest level in a year. While Kingfisher shares have been rallying sharply in the last couple of weeks, shares of other group companies have been on an uptrend for much longer period, largely on reports and speculations about stake sale in various businesses.

The National Stock Exchange and the BSE have also sought clarifications from Kingfisher Airlines on reports that the carrier is in talks with foreign entities and domestic investors for stake sale.

Both bourses in separate notices on Thursday said they were awaiting the response from Kingfisher.

Kingfisher in talks with foreign carriers: Mallya

http://businesstoday.intoday.in/story/kingfisher-airlines-talks-vijay-mallya/1/188460.html

A day before making a presentation to lenders on revival plan of Kingfisher Airlines, its Chairman Vijay Mallya on Wednesday said the carrier is in talks with overseas airlines for investment.

When asked if the debt-ridden airline is in touch with overseas airlines for investment, Mallya said, "Yes, we are in talks." He, however, did not provide details citing "privacy and confidentiality" reasons.

Mallya also informed that his airline will be making a presentation to the SBI led consortium of banks.

"We have regular meetings with KFA banking consortium. I can confirm that there is meeting tomorrow. We will make presentation to them as requested," he told reporters on the sidelines of the annual general meeting of the UB Group.

When asked how beneficial will be the new FDI policy , which allows foreign airlines to pick stakes in domestic air carriers, for Kingfisher, Mallya said, "It is too early to say about the status report of the FDI policy ... There is an established FDI approval procedure. I see a normal course of business going to happen."

Two days ago, SBI, the lead bank of 17-member lenders consortium had expressed the hope that Mallya will come up with "something tangible" for its revival of Kingfisher in the wake of liberalisation in FDI in the sector.

Banks together have an exposure of nearly Rs 7,000 crore in the airline and the loans have all become non-performing assets since January. SBI has an exposure of Rs 1,500 crore to Kingfisher Airlines. 

NPAsource.com hoping to sign up private banks soon

http://www.financialexpress.com/news/npasource.com-hoping-to-sign-up-private-banks-soon/1002144/0

NPAsource.com, a dedicated portal for posting information about bad assets of banks, is hopeful of tie-ups with private sector lenders very soon, a top company official said. NPAsource.com, which has around Rs 13,000 crore worth of NPA notices posted on its website, boasts of clients such as SBI, Bank of India, IDBI Bank, Indian Overseas Bank and Nabard.

"Four public sector banks have already started posting their recovery notices in our website, and we are in talks with other public sector lenders. Also, we are in talks with various private sector banks and are hopeful that one to two private sector banks will start posting their non-performing asset notices in our website soon," chairman and managing director of Atishya Technologies (the promoter of the website) Devendra Jain told reporters here. Such a forum would be another way of resolving the rising NPAs by making available the information about bad assets to all stakeholders with additional inputs.

The company charges in the range of Rs 1,000-1,500 per property for uploading the notice, while a customer, who wants to access the information, has to pay a membership fee. 

The company is also in talks with a few Gulf-based banks to use its services for NPA resolution, along with getting their corporate clients to buy NPAs in the country. The company plans to open branches in New Delhi and Bangalore besides the US and Europe in the next year, Jain said.

Loans to pharma companies turn bitter pill for banks

http://www.business-standard.com/india/news/loans-to-pharma-companies-turn-bitter-pill-for-banks/483322/

Loans to mid-sized pharmaceutical companies have turned bad for a slew of top public sector banks in the first quarter of this financial year. Some of the large lenders are set to restructure some of these, to avoid more slippage.

North India-based Surya Pharmaceutical Ltd, flagship company of the Rs 1,700-crore Surya Corp, defaulted to State Bank of India, Punjab National Bank, Bank of India and Oriental Bank of Commerce in the quarter.

While SBI had an exposure of Rs 460 crore, the total in this account that has become a non-performing asset (NPA) is close to Rs 1,000 crore.

In the quarter ended June, SBI saw fresh slippage to the tune of Rs 11,000 crore and closed the quarter with an NPA ratio of 4.99 per cent of gross advances.

It has pointed to three accounts, one each in the power, road sector and pharmaceutical sectors, as having contributed significantly to its deteriorating asset quality.

SBI says the power and road sector accounts have a chance of getting upgraded once environmental clearances are in place but they are not sure about the pharma company's turnaround.

Loans to another firm, Orchid Pharmaceutical and Chemicals, also become an NPA for Union Bank of India and Andhra Bank. These banks have an exposure of around Rs 500 crore in all.

While SBI loans to Orchid Chem did not slip to the NPA category in the first quarter, sources indicate the lender might restructure these loans to avoid fresh slippage.

SBI’s total exposure to Orchid is Rs 750 crore, including a foreign currency loan.

A loan, if restructured while the asset is classified as standard, can remain in the latter category but the provisioning requirement rises from 0.4 per cent to two per cent. However, if an NPA is restructured, the asset needs to be further downgraded and provisioning requirements increase sharply.

SBI - Concerns over fresh bad loans - Rs 10,800 crores

http://www.business-standard.com/india/news/sbi-swimming-in-troubled-waters/482955/

State Bank of India, the country’s largest lender, managed to beat earnings estimates but that’s the last thing on the mind of investors and analysts. While the company reported a 137 per cent increase in net profit, the bank’s fresh accretion of bad loans at Rs 10,800 crore stood out like a sore thumb. The sharp increase in bad loans has shocked the market, as this is in variance with what the bank said it expected. 

Moreover, the increase has been driven by deterioration in three corporate accounts, which added up to Rs 3,500 crore.

However, analysts say the bank seems confident of upgrading at least two of these accounts in the coming quarters. A hydro-electric power plant is stressed as it has not got environmental clearances. As soon as the clearances come about, the account would be upgraded. Similarly, the second account, in the construction sector, has been hit as the borrower is not being paid for a project where it was a sub-contractor. One pharmaceutical/biotech account is what analysts expect could deteriorate.

What is more worrying is also the bank’s aggression in cutting loan rates. Given the fall in margins and higher slippages, the market would like to get a fix on the bank’s strategy. Though the bank has guided for a net interest margin (NIM) of 3.7 per cent in the coming quarters, analysts think this would be difficult to achieve, given it’s strategy. 

Rs 100,000 crore default by 49 lakh debtors

http://www.financialexpress.com/news/49-lakh-debtors-default-on-rs-1-lakh-cr/970810/0

Over 49 lakh debtors have defaulted in repaying loans totalling more than Rs one lakh crore from various nationalised banks in the country, an RTI query has revealed.

The information was provided by individual banks to Om Prakash Sharma, an RTI activist and a former National Council member of BJP.

The State Bank of India tops the list accounting for 32 percent of the total defaulted amount and 36.3 per cent of the defaulters.

A compilation of the information received indicated that the debtors numbered 49,24,611 and the defaulted amount was to the tune of Rs 1,00,155 crore.

The State Bank of India has a total of 17,88,125 defaulters and the amount involved is Rs 32,534 crores. Punjab National Bank stands second with Rs 9632 crores in default, accounting for 0.09 percent of the total defaulted amount, followed by Union Bank of India where the debtors have not repaid Rs 7615 crore.

There are six banks where the defaulted amount is between Rs 3000 and Rs 4000 crore, four banks where it is between Rs 2000 and Rs 3000 crore, seven where default is between Rs 1000 and Rs 2000 crore and three with less than Rs 1000 crore.

It was revealed that there were 969 debtors who defaulted in repaying loans over Rs 10 crore each, adding up to around Rs 27,000 crore. 

Banks misguide investors on NPA

http://www.financialexpress.com/news/banks-misguide-investors-on-loans-sbi/967922/0

Reserve Bank deputy governor K C Chakrabarty today flayed banks for attributing their sudden fall in profits to the computerised system of recognising bad loans and said this is tantamount to misguiding investors.

"You have misguided your investors for the past five years by not giving your proper NPA (non-performing assets) figures," he told a banking technology summit organised by the industry body CII here.

The senior-most deputy governor who oversees the banking services at the monetary authority, also wondered as to how an inanimate object like the "system" can generate NPAs and said the markets regulator Sebi should look into this issue.

"Should not the (markets) regulator (Sebi), who is dealing with listing, take action against banks?" he asked.

Wondering how even after computerisation, banks are unable to identify NPAs, Chakrabarty said, "so long as system-generated NPAs were not there, was the computer giving wrong figures?"

The deputy governor's comments come in light of a slew of banks, especially the state-run ones like Central Bank of India and Union Bank of India, among others, reporting massive dent in their profits and attributing the same to migration to the system-generated approach of identifying bad loans, over the last fiscal.