State Bank of India (SBI) estimates that around ₹20,000 crore worth of loans will turn bad over the next half of the year on account of COVID-19 related stress. While the bank expects the majority of slippages to come from the small-medium-enterprise sector, it upgraded  ₹5,965 crore of stressed accounts in October 2020, indicating an improvement in economic activity and credit profiles of borrowers.

The majority of slippages during the quarter, around ₹2,756 crore, took place in the agriculture and SME loan book, said Dinesh Kumar Khara, chairman, SBI during a press conference on Wednesday.

“For SMEs, activity levels for the first four months was quite low. But the emergence of demand is helping them to come back and though we had slippages of ₹6,000 crore we were able to pull back around ₹3,000 crore. This year has been unusual as there is no trend getting established on a monthly basis. We will get to see a better picture every month,” he said. Slippages in the agriculture sector took place due to poor outreach to borrowers, although that has improved in the last two to three months, Khara added.

Economic activity revival seems to back on a faster pace during the July to September quarter, as most companies say that their activity levels are back to 70-80% of pre-COVID levels, the bank said in it’s investor presentation. Retail credit growth has also come bounced back to pre-COVID levels and loan disbursements are significantly higher in September 2020 compared to the previous year, it added.

“We are seeing a good amount of traction in home loans, where disbursements are up by 12% on a YoY basis. On auto loans we have seen a growth of 27% in disbursements on a YoY basis and in personal loans we have seen a 61% growth on a YoY basis,” Khara said.

On restructuring requests

“As of now we have restructuring requests worth ₹6,495 crore, around ₹2,400 crore has come from the retail book and ₹4,000 crore is from the corporate book. In the retail book, home loan and personal loan constitutes ₹1,300 crore whereas the majority is from the SME book,” said CS Setty, managing director, SBI. The bank has received requests from 42 corporates for restructuring, under the Reserve Bank of India’s COVID-19 related circular, which account for ₹4,000 crore.

Around ₹13,000 crore worth of accounts may require restructuring going forward, largely in the corporate book and a bit in the SME book, the bank’s management said. It expects the total stressed loan book to stand at ₹60,000 crore by the end of this fiscal year, including restructuring accounts.

Digital channel performance

Around 38% of retail asset accounts and 60% of its savings accounts were added through digital channels. Digital channels now account for 65% of all transactions processed by the bank, up from 56% in previous year.

As of  September 2020, SBI’s flagship app, YONO, had 28.5 million registered users on the app, 4.6 million of which were registered during Q2FY21. It has opened around 1.4 million new savings accounts through the app and disbursed over ₹5,118 crore worth of personal loans till date. During the quarter, the bank also sourced 1.21 new credit cards through YONO and sold ₹121.6 crore worth of merchandise through its online marketplace.

The bank has around 80.7 million internet net banking users and 18.3 million mobile banking users, outside of the YONO ecosystem, as of September 2020.

Financial Snapshot

  • Net Interest Income stood at ₹28,181 crore (up by 15% YoY)
  • Net Profit stood at ₹4,574 crore (up by 52% YoY)
  • Total advances stood at ₹23.83 lakh crore (up by 6% YoY)
  • Retail personal advances stood at ₹7.85 lakh crore (up by 15% YoY), while corporate advances stood at ₹7.87 lakh crore (up by 2.82% YoY)
  • Total deposits stood at ₹34.7 lakh crore (up by 14.4% YoY)
  • Total provisions stood at ₹26,121 crore at the end of September 2020, of which ₹7,091 crore is related to COVID-19 related accounts. Around ₹5,619 crore provisions were made in the quarter (down by 49% YoY)
  • Gross non-performing assets stood at 5.28% (5.44% in June 2020 and 7.19% in September 2019)
  • Net NPA stood at 1.59% (stood at 1.86% in June 2020 and 2.79% in September 2019)