At a time when concerns around the liquidity crunch in the country are high and recent defaults by some shadow banks have raised eyebrows, State Bank of India on Friday said it had not stopped lending non-banking finance companies (NBFCs). The bank said the crises in the NBFC sector were not "grave" as only one or two companies had been severely impacted, and that they needed to address the core problems. "SBI is lending to NBFCs and we will continue to do so... Our decision is based on the risk perception that we have on a particular entity. We have not stopped lending to NBFCs at all," SBI Managing Director Arijit Basu told PTI on the sidelined of IMC's Banking and Finance Conference.
Basu said both the Reserve Bank of India and the central government had taken appropriate measures to address issues around the NBFC sector. He added, the SBI was also trying to address concerns raised by the central bank in its June-7 circular about banks and NBFCs. The SBI's total loan exposure to NBFCs stood at Rs 1.87-lakh crore as of March 31 -- Rs 62,511 crore to housing finance companies; Rs 63,033 crore to government-backed NBFCs; and Rs 67,226 crore to big private sector institutions. Despite this, SBI seems confident of safeguarding its interest. "The overall quality of the NBFC asset portfolio in our books continues to be good. We have already included the stressed NBFC accounts in our estimate for slippages and loan loss provisions for the current financial year," SBI had said in a statement last week.
Last week, the RBI said the apex bank would continue to keep a close eye on developments in the NBFC sector and would take every possible step to ensure its financial stability. RBI Governor Shaktikanta Das said several steps had been taken to enhance the supervision over NBFCs, including on-site examination, off-site surveillance, market intelligence and annual reports of statutory auditors, and that the RBI would work towards bringing corporate governance reforms in both banking and non-banking sectors.
"It has been observed that most bank frauds can be traced to the absence of effective controls. An essential element of an effective system of internal control is a strong control mechanism. It is the responsibility of the board of directors and senior management to emphasise the importance of internal control through their actions and words. Banks should regularly reorient and train their personnel so that they fully understand the importance of internal controls in their respective stations. The boards of banks should specifically pay attention to creating and sustaining a culture of effective control in the banks," Das had said, while delivering the 15th annual convocation address at National Institute of Bank Management, Pune.
Edited by Manoj Sharma
Copyright©2022 Living Media India Limited. For reprint rights: Syndications Today