The largest bank in the country , the State Bank of India (SBI), expects the total loans slippages and restructuring of Rs 60,000 crore in the current fiscal 2020-21.
The bank has already received request for a one-time loan restructuring under the COVID-19 package for Rs 6,495 crore. The request for retail loan restructuring is around Rs 2,500 crore. In fact, a bulk of the restructuring request under retail loan has come from MSMEs. On the corporate side, 42 corporate customers have approached the bank for restructuring loan of around Rs 4,000 crore.
The additional loan restructuring request till December 2020 is expected to be Rs 13,000 crore, which makes it a total restructuring of Rs 19,495 crore under COVID-19.
The RBI has given time till December 2020 to corporate and banks to invoke the loan restructuring for a two-year period. The loan classified as restructured will not be treated as NPAs, but banks are free to make provisions against such loans. "The additional restructuring book would largely come from corporate and a little bit from SMEs," said the SBI chairman Dinesh Khara.
The loan slippages in the first half of FY21 is around Rs 6,393 crore. In addition, the SBI has said that the additional proforma slippages stand at Rs 14,388 crore in the second quarter of 2020-21. The bank expects additional Rs 20,000 crore slippages in the second half of the current year.
The total slippages are pegged at Rs 40,781 crore.
The provisioning requirement for loan slippages and estimated restructuring at 15 per cent of Rs 60,000 crore comes out to be Rs 9,000 crore. The bank has actually provided Rs 7,100 crore in the first half of 2020-21.
The total slippages and restructuring are around 2.5 per cent of the loan book of Rs 23.83 lakh crore. The gross NPAs are at 5.28 per cent. If the restructuring and slippages books slip into NPAs, the gross NPAs will shoot up. But the bank has two more quarters to make the provisions against doubtful loans.
Many suggest the loans will turn NPA once the two-year loan restructuring ends. The NPA problem is hidden today as MSME, corporate and retail borrowers have been enjoying moratorium and restructuring since March this year. Given the slowdown in the economy, there is likely to be an impact on businesses and retail borrowers.
The bank has said that the major challenge would arise from extended working capital cycles and declining cash flows for the industry.
The bank's credit has grown by 6 per cent year-on-year. "The credit growth in retail has come back to pre-COVID levels. We have seen a good traction in home and auto loans," says Khara.