India’s SBI explores new ways to address retail lending stress

A man checks his mobile phones outside the State Bank of India (SBI) branch in Kolkata, India, February 9, 2018. REUTERS/Rupak of Chowdhuri

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MUMBAI, March 30 (Reuters) – The State Bank of India is considering selling pools of non-performing retail loans worth less than 10 billion rupees ($132 million) to asset reconstruction companies, a strategy typically used for large corporate loans.

SBI, which is India’s largest lender by assets, had gross non-performing assets of Rs 1.2 trillion at the end of December, accounting for 4.5% of its loan portfolio, including loans to individuals accounted for more than 619 billion rupees.

Selling a smaller portfolio of retail loans to asset reconstruction companies (ARCs) will help test the market and also gauge the magnitude of demand.

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“We will assess the sale of unsecured retail loan pools as well as some portfolios of small and medium retail businesses that are currently under a bit of high stress for ARCs or special situation funds,” the director told Reuters. General of SBI, Swaminathan Janakiraman. .

“It will also essentially help free up our employees engaged in pursuing these small loans which can then be used for collection of larger business loans where the chances of getting better collection exist,” Janakiraman added in an interview.

The SBI also expects the country’s bad bank, an ARC that focuses on resolving the largest corporate loans, to start submitting binding offers for bad debts worth more than 500 billion. rupees from Thursday.

According to the guidelines under which the bad bank got its license, it is expected to start operations by March 31.

“We expect the binding offers for the stressed assets of the national ARC to be probably between 10 and 40% of the total contributions, which is generally what we achieve through the sale of the ARC,” said Janakiraman, adding that he was not unduly concerned about the delays. .

($1 = 75.7568 Indian rupees)

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Reporting by Nupur Anand; Editing by Alexander Smith

Our standards: The Thomson Reuters Trust Principles.

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