Stress in mortgage loans won’t deter SBI, says Khara


Despite the increase in delinquencies in real estate loans, the State Bank of India (SBI) does not intend to rethink its strategy of aggressively growing this portfolio, given the great potential of real estate finance, the president said. Dinesh Khara.

Although SBI’s mortgage market share in the quarter increased 24 basis points (bps) sequentially, bad debts increased by 59 bps. The bank saw mortgage lending growth of 11% year-on-year.

“When it comes to mortgage lending, the market potential is enormous and there is no reason why we should slow down. We have mastered how to ensure good valuations and timely distribution and we would like to continue to do well, “Khara told reporters during the June quarter results announcement of the bank. Largest lender Indian had mortgage loans outstanding ₹5.05 billion as of June 30.

The rise in mortgage defaults shows how the economic distress during Wave 2 and the lockdowns that followed reduced the repayment capabilities of small businesses, many of which are also mortgage borrowers. Almost 50% of SBI’s home loan portfolio goes to the self-employed class, Khara said.

“The stress observed in this book is due to the disruption in the cash flow of small and medium enterprises (SMEs). Our real estate loans are aimed at (first-time buyers). So there will be every effort and every effort on their part to honor their obligation, and I hope that is not as much of a concern, ”he said, adding that the bank had already passed the bad debts of 1.39% to those who buy homes. as of June 30 to 1.14% thanks to subsequent collections in July. The bank expects to see less than 1% of bad debt in this segment, he said.

Asset quality of SBI’s personal gold loan portfolio of ₹21,293 crore was also hit, with bad debts of 2.24% in the June quarter, down from 0.82% in the March quarter, as movement restrictions impacted recoveries.

The bank recorded a profit of ₹6,504 crore in the three months to June, 55% more than the previous year, thanks to lower provisions. Overall, the quality of SBI’s assets has deteriorated sequentially due to the covid. Its gross doubtful accounts represented 5.32% of its total advances, up 34 bps sequentially. However, slippages of ₹15,666 crore in the June quarter was less than ₹21,934 crore in the March quarter.

“We have seen slippages from SMEs and mortgage segments. The bank has seen a setback or decent recoveries on home loans and other retail borrowers. The SME sector is a little stickier, and we are seeing better traction for debt restructuring in this sector, ”he said.

Of the ₹7,300 crore of Reserve Bank of India (RBI) second window loan overhaul requests, approximately ₹1,400 crore came from the SME sector, and the bank has already overhauled around ₹1,100 crore in SME loans. The bank hopes that with blockages largely absent during this quarter, economic activity should pick up and the slippages would be rectified. Admittedly, the bank has recovered since June 30 ₹4,700 crore in loans from those who went non-performing in the first quarter.

“We had a very difficult June quarter so it’s too early to really give any advice. But our effort would be to keep the slip rate below 2%, ”Khara said.

Khara said the bank’s retail credit growth in FY22 will be similar to that of the previous fiscal year. On the corporate side and in particular mid-sized companies, SBI is seeing higher uses of credit limits, a sign of improving demand. The bank, he said, would be able to achieve 9% overall loan growth in FY22.

“We are only waiting for the opportunity to support credit growth, but it will come from borrowers and the real economy,” he said.

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