P. K. Malhotra in Calcutta on Friday. Picture by Kishor Roy Chowdhury
Calcutta, Sept. 13: The State Bank of India’s housing loans are likely to counter any adverse impact on its retail advances because of the recent tightening of rules on car loans.
SBI deputy managing director P.K. Malhotra today said the bank was expecting a 20 per cent growth in advances, driven by the retail segment.
“Retail growth will be largely driven by housing (advances),” Malhotra said on the sidelines of a seminar organised by the CII here today.
The bank recently tightened the eligibility conditions for auto loans. Only salaried individuals with an annual income of Rs 6 lakh and above can borrow from the bank.
Malhotra expects the share of car loans in total retail advances to come down after the new norms that are meant to minimise defaults.
“We always keep in mind the repayment capability. We don’t finance based only on the value of the asset,” he said.
In the April-June quarter, auto loans constituted 12 per cent of the total advances, growing 38.71 per cent over the same period a year ago.
Malhotra said there was no moderation in project financing during the current slowdown. “Our project finance disbursement is more than last year.”
Allahabad Bank chairman and managing director Subhalakshmi Panse, who was also present at today’s event, said corporate debt restructuring (CDR) would undergo significant changes after April 1, 2015 when the revised guidelines based on the recommendations of the Mahapatra committee would come into effect.
“The scenario is going to undergo a total change from April 2015. After that, the accounts will not remain standard. The moment it comes for CDR, the account will automatically become sub-standard. And the moment it becomes sub-standard, it will be added to the NPA (non-performing asset) portfolio of the banks who have to make provisions upfront of 15 per cent,” Panse said.
“I think it will be a big challenge for corporate houses when they approach the banks for CDR. Because for a bank, when an account becomes NPA, a huge provisioning is required,” she said.
Greater provisioning impacts the profitability of the lenders.
Panse said the implementation of the recommendations would check the banks’ propensity to help promoters.