SBI pulls out all stops to improve recoveries

State Bank of India (SBI) is pulling out all the stops to improve recoveries from written-off accounts as it seeks to boost profit and reduce provisions.

In the September quarter, India’s largest lender was able to recover Rs.627 crore from written off accounts through its stressed asset management group, up nearly 35% from the Rs.466 crore it recovered from such accounts a year ago.

While the bank does not give any forecasts on the amount it plans to recover in the next few quarters, M.G. Vaidyan, deputy managing director, stressed assets management group (SAMG) at SBI, noted that the recoveries will be “substantial”.

SBI is not going easy on any kind of account wherever some recovery is possible, said Vaidyan.

“We are pushing efforts to make recoveries in all types of accounts, even those where we don’t have any assets that can be possessed and then auctioned,” Vaidyan said.

Improving recoveries are an important part of the bank’s attempts to reduce the pile of stressed assets on its balance sheet.

Stressed loans, the sum of gross non-performing assets (NPAs) and restructured assets, stood at 8% of total loans as on 30 September, lower than the 8.55% at the end of the preceding June quarter.

While recoveries helped, lower slippages also supported a reduction in gross NPA. In the July-September period, SBI reported slippages worth Rs.5,875 crore, lower than Rs.7,318 crore reported in the preceding three months.

One avenue that the bank will continue to use to improve recoveries is the auction of properties that have been pledged as collateral against defaulting loans.

The bank is attempting to attach private properties of small business owners and recover as much as it can.

The bank has been conducting these auctions once every quarter.

In September, 625 properties valued at about Rs.1,000 crore were put up on auction. SBI did not disclose the amount it recovered in the September quarter auctions.

At the auctions in June and March, properties worth Rs.145 crore and Rs.100 crore were sold, respectively.

In both these auctions, properties worth Rs.1000 crore each were put up for bidding.

To improve the recovery rate from such auctions, SBI now plans to use local advertising.

According to Vaidyan, the bank had aggressively advertised details about Mumbai-based properties days before the mega e-auction which the bank had conducted in September, which had helped the bank in improving its sale through auction.

In the mega electronic-auction in December, the bank will advertise locally in other states, too, to attract buyers.

To be sure, other large public sector banks are also pushing recovery efforts.

Last week, Bank of Baroda’s managing director and chief executive, P.S. Jayakumar said that the lender would focus on boosting profits through aggressive recovery of bad loans.

However, in all such efforts, the main challenge for the banking system remains pushing such recoveries through the legal system.

The slow rate of resolution through the debt recovery tribunals (DRTs) works against speedy recovery from stressed assets as it takes a long time before the bank can take possession of any of the defaulter’s assets, Vaidyan said.

“Another important challenge is the co-operation of the borrowers in this matter. Typically, if the borrowers wish to delay the recovery proceedings, they have a number of avenues available to do so,” he added.

While analysts say that it will take some time before recoveries and upgrades outpace slippages, they feel this is an important area for banks to focus on.

“Even in the previous economic cycle, gross and net NPAs had started coming down as recoveries and upgrades improved. As certain sectors improve, they will provide good opportunities for banks to improve their recoveries,” said Vaibhav Agrawal, vice-president- research, Angel Broking.