State Bank of India reported a very good quarter in terms of asset quality.
Below is the verbatim transcript of the interview.
Q: What is the way forward and will the asset quality improvement continue even in FY18?
A: I should think so. What gives me hope is the macro parameters seem to be improving further, in fact we had a customer meet and most of the customers expressed their confidence that things seem to be looking better. If you look at the core areas of cement and steel, most of the units are currently running at above 70 percent capacity. So when these sorts of things happen then you can believe that construction is getting back on stream.
Metals and mining also seems to be doing better given the fact that worldwide commodity prices are hardening. So overall there seems to be more confidence in the economy and if that happens then the banks will be the first institution that will feel the beneficial impact.
Q: Going forward the watch list has come down from 18,000 to 13,000 now and you are saying as of April 1 it will be about 32,000 combining all the associations. Could you give us some visibility on the resolution of those particular things given that there is National Company Law Tribunal (NCLT), you spoke about Reserve Bank of India's new ordinance helping you to some extent?
A: It is very difficult at this point of time to see how much of these things will happen. It is suffice to say that because these are now under watch list, we will be looking at them to see whether we can do a resolution upfront so the quality of the assets do not deteriorate further. However, having said that we still do not know how long it will take for the NCLT to turn things around.
If you remember, they will take around 270 days. So 270 days, already two months have passed so even if you send it to NCLT these cases will only come in the next year. Do we have time for that or do we want to resolve them today. If we need to resolve them today, are we in a position to do so without any of the other provisions from the RBI or otherwise. So these are questions which at this point of time is difficult for me to answer.
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