Demonetisation delayed NPA resolution, merger by a quarter:

 SBI The demonetisation move has impacted the bad loan resolution and the merger of State Bank of India’s merger with its associates by one quarter, The demonetisation move has impacted the bad loan resolution and the merger of State Bank of India   ’s with its associates by one quarter, according to bank Chairman Arundhati Bhattacharya. On November 8 last year, the government made a sudden announcement of invalidating Rs 500 and 1000 currency notes putting the entire country and the banking system in a limbo for over two months. Speaking to the media in a conference call post results, Bhattacharya said that the focus was entirely on demonetisation by banks and the government. She said, “On resolutions happening, we were hopeful that things would start moving by this quarter. However, the demonetisation has actually put us back by a quarter. So, we are working very hard but we don’t know if they will come in this quarter or maybe slip over to the next year.” State Bank of India declared a 134 percent jump in its standalone net profit for October to December quarter. The last time the bank posted a year-on-year rise in its quarterly profit was the June to September quarter in 2015. “Our outlook on asset quality was Rs 40,000 crore (net NPAs) for this year. I don’t see this number coming down this year. But because the topline growth has been weak this quarter, the asset quality didn’t decline much, Bhattacharya said.

 At present, the bank’s total gross NPAs stood at Rs 1.08 lakh crore (7.23 percent of total loans), while net NPAs were at Rs 61,430 crore (4.24 percent), a marginal rise from the previous quarter numbers. The bank’s watchlist – potential bad loan accounts – stands reduced by more than half in the nine months to Rs 17,992 crore from Rs 34,772 crore as on March 2016. The SBI Chairman said, “Overall stress reducing will be seen only when the economy is doing much better, which will be when there is demand pick-up. It could have been derailed due to demonetisation. So, we have to wait for the demand pick-up to be visible but I would say it would take another quarter or two.” B Sriram, SBI’s Managhing Director, was quick to add that “the bridge is too high as of now”. Currently, under the many resolution mechanisms, SBI has 15 bad loan accounts worth Rs 9,440 crore in process under the strategic debt restructuring scheme, 10 accounts worth Rs 8,645 crore and assets worth Rs 17,162 crore under the 5/25 refinancing scheme. SBI-Associates merger Last year in March, SBI announced its merger with its five associate or subsidiary banks and Bharatiya Mahila Bank (BMB) after government gave its green light for the merger.

  The SBI chief said, “We are quite ready and as soon as the government notifies the final order, we will be ready to kick it off. We were planning to do it by March but again because of demonetisaiton it will probably mean a deferment of a quarter.” The bank is awaiting government notification approving the merger of the parent bank with five of its associates -- State Bank of Hyderabad, State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Travancore and State Bank of Patiala and Bharatiya Mahila Bank. The merger was slated to be completed by March 2017. However, the plans now stand postponed to the first half of next financial year. Collectively, the associate banks have seen a loss of Rs 789 crore as against a combined loss of Rs 181 crore in the year-ago period. Sequentially, the total net loss was reduced from Rs 3,096 crore in the second quarter ended September 2016. SBI Chairman expects a total loan growth of not more than 6.5 percent for the full year ending March 2017

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