SBI to slash interest rates on education loans

The country’s largest lender SBI is likely to cut interest rates on education loans by up to 100 basis points (1 per cent), effective Monday.

When contacted the SBI Chairman, Mr Pratip Chaudhuri, said, “Please wait for a formal announcement”, while his Chief General Manager for personal banking, Mr Rajeev Mehra refused to either deny or confirm the development, saying he “will not talk official matters on a holiday”.

Meanwhile, according to sources in the know of the development, State Bank of India has decided to reduce interest rates on education loans by 25-100 bps across various maturities, after its Alco (asset, liability committee) met over the weekend.

Accordingly, for a loan of Rs 4 lakh, interest rate will be down by 25 bps to 11.75 per cent; for loans in the Rs 4-7.5 lakh range, the rate is down 100 bps to 12.50 per cent, while for loans above Rs 7.5 lakh, the rate is lower by 25 bps to 12.25 per cent.

SBI is also offering a concession of 50 bps on interest rates for loans given to female students.

“We may have an Alco meeting this week itself and it will have education loan rate cut on top of the agenda,” Mr Chaudhuri had said on February 13, while announcing the third quarter earnings. SBI had reported an unexpected 15.4 per cent spike in its standalone net income to Rs 3,263 crore.

After a sharp spike of nearly 3 percentage points in lending rates over the past two years, banks are reversing the trend to shore up their loan books, which have been steadily heading south, according to experts.

Mr Chaudhuri had, however, ruled out any possibility of a reduction in the base rate or home loan rates saying they are of long-term nature. SBI’s base rate stands at 10 per cent as of now, which is the lowest in the country.

“The possibility of (reduction) in home loans is less as the rate is 10.50 per cent and the base rate is 10 per cent. Hence, the possibility is less. Moreover, the tenor of a home loan is 25-30 years, (so) we have to think about it a lot,” Mr Chaudhuri had said.

Venkat Nageswar is new SBI GM

Mr C. Venkat Nageswar has taken charge as General Manager-Network 1 of State Bank of India, Bangalore circle. He will be overseeing the southern part of Karnataka. Earlier, he was Special Secretary to the Chairman at the bank's corporate centre in Mumbai.

SBI asks Kingfisher Airlines to reverse about Rs 100 crore paid to Vijay Mallya and UB Holdings

Kingfisher Airlines, the carrier waiting to be bailed out by banks, has been directed by the State Bank of India to reverse nearly Rs 100-crore guarantee commission it paid to promoter Vijay Mallya and UB Holdings as it is a regulatory violation, said three people familiar with the direction.

Lenders are seeking the reversal of transactions by the ailing airline as a pre-condition to consider the second round of bailout in as many years after it posted yet another quarter of losses.

"Mallya has agreed that they would not exercise the option," said a banker requesting anonymity. But it is not clear yet whether the past transactions are being reversed.

The carrier, which is facing liquidity crunch, entered into an agreement with Mallya and his holding company, UB Holdings, where the airline had paid Rs 49.48 crore and Rs 58 crore, respectively, against the guarantees they had provided for the Rs 7,000-crore loans from banks.

The airline, promoted by liquor baron Mallya, has been teetering on the brink of collapse for a few months amid cancelled flights and non-payment of salaries. Lenders are laying down strict conditions for the next round of funding as the airline failed to improve its performance even after loan restructuring.

Apart from pushing the banks to a disadvantage, it is also a regulatory violation when promoters get paid for what is essentially their business. "The system of obtaining guarantees should not be used by the directors and other managerial personnel as a source of income from the company,'' RBI has said.

"Banks should obtain an undertaking from the borrowing company as well as the guarantors that no consideration whether by way of commission, brokerage fees or any other form, would be paid by the former or received by the latter, directly or indirectly."

Amid this controversy, SBI Capital Markets, the mandated firm to restructure its loans, on Friday made a fresh case for Kingfisher Airlines on grounds that initiatives taken by the government makes it a viable proposition. SBI Caps has asked banks to provide Rs 800-1,000 crore of fresh loans for the airline's revival.

Kingfisher and lenders discussed various alternatives of funding the airline. Bankers said they needed time to give their response.

Source: EconomicTimes

SBI not to extend fresh loans and investments in Maldives due to political turmoil

The State Bank of India has decided not to extend any fresh loans or make new investments in the Maldives until the political situation improves there. SBI's three branches enjoy a dominant position in the island nation, holding a quarter of its deposits and 42% loans.

"We will not take any fresh exposure till June this year," said a bank official.

Maldives plunged into a political turmoil last month after protesters, backed by police, toppled Mohamed Nasheed, Maldives' first democratically elected leader. An e-mail sent to the bank's international banking division drew no response.

According to the external affairs ministry, SBI has been playing a vital role in the economic development of the Maldives since 1974 by providing loans for island resorts, marine exports and businesses.

In 2009, SBI bailed out Maldives from a severe foreign exchange crisis when it subscribed to $100million dollar-denominated treasury bonds issued by the Maldivian Monetary Authority, an Indian government official said.

SBI's gross interest income from global operations rose from Rs 70,993.92 crore to Rs 81,394.36 crore in 2010-11, registering a growth of 14.65% in a year.

India Inc's exposure in Maldives is quite substantial. While hospitality major Taj Group runs two hotels, infrastructure company GMR is participating in developing the Male International Airport.

In August 2011, the Export-Import Bank of India ( Exim Bank) issued a line of credit (LoC) of $40 million to the Maldives government for financing purchase of eligible goods, services, machinery and equipment, and consultancy services from India for construction of 500 housing units in Maldives.

Source: EconomicTimes

SBI sets sights on absorbing State Bank of Mysore

After taking over two associate banks — State Bank of Saurashtra in 2008 and State Bank of Indore in 2010 — State Bank of India has set its sights on assimilating the nearly century old State Bank of Mysore (SBM) this year.

As part of its consolidation strategy, India's largest bank wants to first merge the smaller associate banks before attempting to take over relatively bigger associates such as State Bank of Hyderabad (SBH) and State Bank of Travancore (SBT).

Branch network

“We will take over smaller associate banks first as it is easier to integrate them. We have gained valuable experience through the acquisition and integration of State Bank of Saurashtra and State Bank of Indore,” said a senior bank official.

However, in the case of bigger associate banks, the official observed that the issue is that their branch network in their home State is as big as SBI's branch network in that State. So, the integration will take longer as a branch rationalisation exercise will have to be undertaken.

In the case of SBM, which is listed on the bourses, a swap ratio (whereby SBI will offer its own shares in exchange for SBM's shares to conclude the acquisition) will have to be arrived at for the minority shareholders.

While SBI holds 92.33 per cent stake in SBM, minority shareholders hold the balance stake. The Mysore-headquartered associate bank has over 700 branches.

Share of profit

The five associate banks' share in the consolidated net profit of SBI was higher (33 per cent) in FY 2011, against 25 per cent in FY 2010.

SBI had reported a lower consolidated net profit at Rs 10,865 crore in FY2011, against Rs 11,734 crore in FY2010.

Among the five banks, SBH net profit was the highest at Rs 1,166 crore; followed by SBT (Rs 728 crore), State Bank of Patiala (Rs 653 crore), State Bank of Bikaner & Jaipur (Rs 551 crore), and SBM (Rs 501 crore).

As on March-end 2011, the State Bank group had a network of 18,266 branches including 4,724 branches of its five associate banks.

SBI launches special package for railway employees

State Bank of India has launched a special salary package for the Railway employees.

According to Mr B. Venugopal Reddy, Deputy General Manager, Administrative Unit, SBI, Hubli, the package consists of special privileges to employees of railways drawing their salary from State Bank of India.

Special previleges

The privileges include reduced interest rates on home loans, car loans and personal loans. The concessions are available in the locker rentals.

He further stated that zero balance saving bank accounts are opened for all the persons.

Free drafts are issued according to the entitlements of railway employees. Besides, discounts are available up to one per cent on gold coin purchases.

“These are only a few benefits and there are several other benefits also being extended by SBI to the railway employees,” Mr Reddy added.

Special package

The special package was announced by State Bank of India at the Hubli Main Branch, adjacent to DRM's Office, Keshwapur, Hubli.

Speaking on the occasion, Mr A.K. Brahmo, Chief Personnel Officer, South Western Railway, said the Indian Railways and State Bank of India are having the largest employers in India. The Indian Railways is the fourth largest Railway in the world, whereas State Bank of India has branches all over India and abroad.

He said 46 per cent of railway employees are drawing their salaries from State Bank of India and the remaining 54 per cent employees salaries are being shared by other Banks.

Mr Brahmo stated that 7,000 more staff with be joined with South Western Railway within 2-3 years, thereby, the volume of salary package for railway employees would be enhanced.

He complimented the State Bank of India officials for taking such positive initiative in this direction.

anil.u@thehindu.co.in

SBI’s asset quality worrying as bad loans double in Q3

State Bank of India reported a net profit of Rs 3,263 crore for the quarter ended December 2011, up 15 per cent from Rs 2,828 crore in the corresponding year-ago quarter. The increase in profit was on account of a robust rise in net interest income, which touched an all-time high and improvement in net interest margins.

Profits grew despite an increase of over Rs 1,300 crore in loan loss provision and an over Rs 800-crore depreciation in investment on account of losses in the equity portfolio, said Mr Pratip Chaudhuri, Chairman, SBI.

“The bank is back on a consistent growth path,” he said.

The bank increased loan loss provisions by 84 per cent to Rs 3,006 crore (Rs 1,632 crore).

However, asset quality for the country's biggest bank still remains a concern, with gross non-performing assets touching Rs 40,098 crore as on end December, from Rs 23,438 crore in the ‘year-ago' period.

Fresh slippages to NPAs in the third quarter were to the tune of Rs 8,161 crore.

‘Worst is over'

“We think the worst is over with regard to NPAs. NPAs have plateaued. The biggest hit was from one aviation company, which accounted for about Rs 1,200 crore of the NPAs. But we could expect some improvement in the sector following the proposal to allow FDI and direct import of fuel,” Mr Chaudhuri said.

The highest share in NPAs was from the agriculture sector, which contributed 9.45 per cent. SME's share was 7.9 per cent, mid-corporate was 5.54 per cent and large corporate was at 1.1 per cent. However, strong growth in margins will make it easy to absorb the NPAs, Mr Chaudhuri said.

NIM for December was 3.82 per cent, higher than the guidance of 3.65 per cent. Shedding high-cost deposits and eliminating the dependence on Certificates of Deposits, which come at a high cost, helped the bank improve its NIM.

Credit growth

The demand for credit is muted, said Mr Chaudhuri, although there is very high demand for dollar credit. This year the bank hopes to meet its guidance of 16 per cent growth in credit. The bank may cut interest rates in some loan segments, such as educational loans, but not the Base Rate, Mr Chaudhuri said.

On a consolidated basis, net profit increased to Rs 4,318 crore (Rs 3,710 crore), a growth of 16 per cent.

For the April-December nine-month period, net profit was down to Rs 7,657 crore (Rs 8,244 crore), because the first quarter of the fiscal was a tough one, Mr Chaudhuri said.

Shares of SBI closed at Rs 2,129 crore — down 2 per cent from its previous close on the BSE.

Strong case for higher govt stake: SBI Chairman

The State Bank of India Chairman, Mr Pratip Chaudhuri, on Monday said there is a strong case for the government to infuse capital in his bank.

The reason: the 18.12 per cent post-tax return that the capital investment will fetch will be far in excess of the cost of the government's borrowing.

“The cost of government borrowing is in the 8-9.5 per cent range. But infusing capital in SBI will give the government a post-tax return of 18.12 per cent,” explained the SBI chief, at a press meet.

The expected capital infusion of Rs 7,900 crore, coupled with a plough-back of profit (the bank has estimated full year profit in the Rs 10,000-11,000 crore range), will see Tier-I capital adequacy (core capital) cross the 9 per cent level by March-end 2011, against the current level of 7.59 per cent, said Mr Chaudhuri.

Will seek re-rating

The capital infusion will see the government's stake in the bank go up to 62 per cent from 59.40 per cent as of December-end 2011.

The bank could leverage the higher government shareholding to raise further capital, either through a follow-on public offer or the qualified institutional placement in the next financial year.

Based on the expected higher capital adequacy ratio, India's largest bank will seek a re-rating from global ratings firm Moody's.

In October 2011, global ratings firm Moody's had downgraded SBI's financial strength rating by a notch to ‘D+' on account of the bank's low Tier-I capital ratio and deteriorating asset quality.

SBI Global Factors

SBI Global Factors Ltd, a subsidiary of State Bank of India, may either be sold to strategic investors or merged with the parent bank, according to Mr Pratip Chaudhuri, Chairman, SBI.

SBI holds 85.39 per cent stake in SBI Global Factor Ltd. The remaining 14.61 per cent stake is held by SIDBI, Bank of Maharashtra and Union Bank of India.

With the Lok Sabha passing the Regulation of Factors (Assignment of Receivables) Bill 2011, the State Bank of India chief observed that the bank may be in a better position to undertake the factoring business in-house.

In the nine months ended December-2011, SBIGFL reported a net loss of Rs 80 crore. However, it turned in a profit of Rs 20 crore in the October-December 2011 period.

The non-banking finance company has a total business of Rs 2,500 crore, said Mr Shyamal Acharya, Deputy Managing Director, SBI.

Capital adequacy

Mr Acharya explained that NBFCs are required to maintain a higher capital adequacy ratio of 15 per cent.

Further, since the NBFC is not a wholly-owned subsidiary, taxation rules do not permit setting off losses against the profit of the bank.

SBIGFL provides factoring (a financial transaction entailing sale of accounts receivable by a business enterprise to a factor — SBI Global Factors Ltd— at a discount) and forfeiting (a financial transaction entailing purchase of accounts receivable from exporters by a forfeiter — SBIGFL).

State Bank of India may raise benchmark size ($1 billion) resources under its medium-term programme only if the cost of borrowing softens to LIBOR plus 225 basis points.

SBH launches welfare scheme for underprivileged girls

State Bank of Hyderabad has launched a welfare scheme to provide financial assistance to underprivileged/differently abled girl students.

Under the scheme, christened as ‘SBH Vidya', each of the 1,410 branches of SBH in Andhra Pradesh will adopt a student studying between VI-X standard based on the recommendation of the school management committee.

The identified students would be extended Rs 5,000 per year as financial support to meet various requirements till she reaches X standard.

“Each year, we propose to extend this assistance to new beneficiaries under this scheme,'' Mr M. Bhagavantha Rao, Managing Director, SBH, said after formally launching the scheme here on Tuesday.

The scheme was part of corporate social responsibility and community banking activities, he added.

SBI waives service fee on SME loans

Country's largest lender State Bank of India has decided to waive guarantees and annual service fees on loans given to small and medium businesses, guaranteed under the Credit Guarantee Fund Trust scheme.

To improve credit flow to the SME sector, the government- appointed Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) acts as a guarantor for loans up to Rs 1 crore. CGTMSE charges the above-mentioned twin fees to borrowers.

"The fees are basically a kind of insurance premium. To help clients, we have now decided to pay up to the Trust from our books," SBI Managing Director (National Banking) A Krishna Kumar said. The decision was taken two weeks ago.

The Trust, which came into being four years ago, charges a guarantee fee ranging from 1 to 1.5 per cent of the loan amount, while the annual service fee ranges from 0.50-0.75 per cent.

Kumar parried a question on the financial implication of the move on the bank's balance sheet, but said this is a long- term arrangement, not a short-term move to lure customers.

Explaining the rationale, Kumar said the presence of such a commission clause dissuades "good borrowers", who feel it is unnecessary to take the extra burden in loan servicing.

Additionally, paying up the fees from the bank's own books will act as a "psychological deterrent" to the bank's staff, who can become complacent as the Trust stands guarantor to such loans, Kumar said.

If a loan turns bad, CGTMSE pays back 75 per cent for the principal to the lending bank and an additional up to 15 per cent depending on the case, he added.

Source: Financial Express

Fed-up SBI 'to name and shame' defaulters

The State Bank of India, the country's biggest lender, will name and shame 'wilful' defaulters and put their pictures in newspapers to get them to pay up, a leading business daily said on Saturday.

"The fresh approach will ruffle a few feathers," the paper quoted a bank executive as saying.

A 'wilful defaulter' is one who does not meet payment obligations even when he or she has the funds.

Bad loans in the country could jump to as much as 5.8% of the total within two years in a severe risk scenario, up from 2.8 percent in September, according to an RBI report.

The non-performing loan ratio for Indian banks was 2.3% in the last fiscal year.

Source: Business Standard

SBM net profit down 15.98% in third quarter

State Bank of Mysore registered a net profit of Rs 110.94 crore in the third quarter of 2011-12 against Rs 132.04 crore in the corresponding period of the previous fiscal, recording a decline of 15.98 per cent.

The net profit for the first nine months of the current financial year stood at Rs 253 crore as against Rs 336.79 crore in the corresponding period of the previous fiscal.

The net interest income of the bank during the third quarter stood at Rs 413.42 crore (Rs 443.79 crore).

However, ‘other income' of the bank registered a growth, at Rs 106.88 crore (Rs 97.17 crore).

Non-performing assets (NPAs) also increased during the quarter.

The gross NPA stood at 3.67 per cent (3.20 per cent), and net NPA, 1.73 per cent (1.47 per cent).

The provisions for NPAs amounted to Rs 60.81 crore (Rs 85.68 crore) during the quarter.

On Thursday, the scrip closed at Rs 520 on the BSE against the previous closing of Rs 528.65.

vinayakaj@thehindu.co.in

SBBJ profit up 24% in Q3

State Bank of Bikaner and Jaipur has reported a 24 per cent increase in net profit at Rs 164 crore in the October-December 2011 period, against Rs 132 crore in the corresponding period last year.

A 37 per cent increase in net interest income to Rs 630 crore (Rs 430 crore in the October-December 2010 period) boosted the bank's profitability despite provisions towards bad loans jumping to Rs 142 crore (Rs 76.50 crore).

Mr Shiva Kumar, Managing Director, SBBJ, attributed the profitability to better funds management and acquisition of high-yielding assets.

Govt stake in SBI to go up by 2.5% post Rs 7900 cr capital infusion

The country's largest lender State Bank of India (SBI) today said the government's stake in the company is likely to increase by up to 2.5 per cent following the capital infusion of Rs 7,900 crore.

"If you go by the past share price of SBI, it (the price of preferential allotment) is likely to be somewhere about Rs 1,800 to 2,000. If that is the range that is going to happen, then government equity shares will go up by 2-2.5 per cent," SBI Managing Director Diwakar Gupta told reporters here.

At present, the government of India holds a 59.4 per cent stake in SBI.

Gupta said the preferential allotment would be governed by the guidelines of market regulator Sebi, which is the higher of the six-month average or 15-day average share price of the company.

The capital infusion by the government will raise the Tier-I capital of the bank to about 8 per cent.

He said SBI would need about Rs 15,000 crore of additional capital and the infusion could happen by way of qualified institutional placement ( QIP), a follow-on public offer (FPO) or a rights issue.

"We would be needing about Rs 15,000 crore of additional capital. For the current year, the calculation is closer to Rs 8,000 crore for Tier-I," Gupta added.

He said SBI has submitted a rough plan of its capital requirement for the next five years to the government. "The total capital required over three years is Rs 28,000 crore. The 15,000 crore is part of that," Gupta added.

SBI had raised over Rs 16,000 crore through a rights issue in 2008. In the last SBI rights issue, the government contribution to the bank was in the form of bonds, rather than cash.

As of September, 2011, the capital adequacy ratio (CAR) of SBI stood at 11.4 per cent. Of this, Tier-I capital stood at 7.47 per cent at the end of second quarter against the minimum 8 per cent level desired by the government.

Source: EconomicTimes

SBI Life launches multi-lingual website

Private insurer SBI Life Insurance today launched multi-lingual website in nine Indian languages to facilitate communication with customers in the language they are comfortable with.

The website will provide information in Hindi, Marathi, Gujarati, Tamil, Telugu, Malayalam, Bengali, Kannada and Punjabi.

“In line with our customer centric business philosophy, the multi-lingual website has been created to facilitate communication with customers in the language they are most comfortable with. The initiative is aimed at further simplifying customers’ understanding about our products and services so as to enable them to make well-informed decisions before investing their hard earned money,” SBI Life Managing Director and CEO Mr M N Rao said in a release issued here.

To reach out to rapidly increasing online audience, the company recently strengthened its presence on the online medium.

With India crossing the crucial 100 million internet users’ mark in December 2011, SBI Life’s initiative assumes significance given the fact that a large section of internet usage would emanate from tier-2 and tier-3 towns where web users prefer to browse content in their native language.

The company, which is joint venture between the State Bank of India and BNP Paribas Cardif, has a market share of 18.9 per cent among private life insurers and a total market share of 5.2 per cent.

Centre approves Rs 7,900-cr capital infusion in SBI

The Centre has approved capital infusion of Rs 7,900 crore (including premium) into State Bank of India by way of preferential allotment of shares.

This was conveyed to SBI through a Finance Ministry letter dated January 30, the country's largest commercial bank informed the Mumbai stock exchange on Monday.

With this, the Centre's stake in SBI would go up to 65 per cent. Currently, the Centre has 59.4 per cent stake in the bank . The capital infusion would also help raise the Tier-I capital of the bank to 8 per cent.

The SBI Chairman, Mr Pratip Chaudhuri, had earlier this month said that the Government was looking to make a capital infusion of Rs 6,000-8,000 crore by end-March.

krsrivats@thehindu.co.in

SBI may return to overseas markets

State Bank of India (SBI), the country’s biggest lender, said it could revive international fundraising plans in three-four months, a sign it believed the euro zone crisis might be easing.

The bank, which is involved with about a quarter of all bank loans and deposits in the country, said it would launch the fundraising once it had seen international markets stabilise.

“We would like to come in as early as maybe in three or four months time,” Hemant Contractor, a managing director at the bank, told reporters during a press conference at the bank’s office in the Belgian city of Antwerp.

“Because of the slight instability in the capital markets, we have deferred our plans, so once there is some stability, we will tap the markets,” he said.

In November, he had said the bank would hold off on its fundraising plans because of conditions in the international markets, which have been under pressure because of worries over highly indebted European nations.

Contractor said the plans would be finalised after the bank’s quarterly results next month.

Lat year, SBI had said it could raise up to $10 billion abroad, as it sought cash to lend to companies on the subcontinent to help fuel their explosive growth.

“There is a demand for funds from our customers, and it’s because of that that we are thinking of tapping the markets now,” Contractor said.

Even though India saw its slowest growth in national output for over two years in the quarter ended September, that was still an increase of almost seven per cent.

The bank could raise upwards of $500 million, likely in US dollars, he said.

“Depending on how the markets play out, we will decide on the currency ... but in all likelihood, it will be US dollars.”

Source: Business Standard

Public sector banks' ATM move 'has not hit SBI's plans'

The move to set up ATMs through a consortium of public sector banks (PSBs) in the country has not hampered the ATM-related activities of State Bank of India, according a top executive.

The move follows a directive by the Government in this regard.

In an informal chat with Business Line on the sidelines of a CSR (corporate social responsibility) programme of the bank here on Thursday, Mr A. Krishna Kumar, Managing Director and Group Executive (National Banking) of SBI, said that the process of putting ATMs through consortium of PSBs has not hampered its plans related to ATMs.

Stating that the bank has nearly 26,000 ATMs in the country, he said: “We need more ATMs there is no doubt about that. Our number of debit cards is very strong. We have more than 10 crore debit cards. It is not that the current process has hampered us in anyway in our efforts to supply ATM cards and debit cards to our customers.”

Before the decision was taken at the ministry level to consolidate the ATM requirements of the entire PSBs, SBI had thought of installing around 10,000 ATMs during the current fiscal. “Because of this development, our progress has not been there in this front,” he said.

The ultimate objective of this method is to reduce the cost, and to have a standardised format of ATMs, he said.

Asked about the progress in the procurement of ATMs through consortium mode, Mr Krishna Kumar said that it is at the RFP (request for proposal) stage.

“I think some time is given to the ATM manufacturers and suppliers to respond to the RFP and to the tender. May be in a couple of months all things would be completed,” he added.

vinayakaj@thehindu.co.in

SBH ties up with Tirumala Milk Products for dairy loans

State Bank of Hyderabad has entered into a memorandum of understanding with Tirumala Milk Products to provide loans to farmers for dairy activity.

According to the agreement, SBH would give loans to farmers who are identified by Tirumala Milk Products Ltd to undertake dairy activity.

“This will help increase income levels of farmers and also create employment,” Mr M. Bhagavantha Rao, Managing Director, State Bank of Hyderabad, told newspersons after signing the MoU here on Monday.

For the third consecutive year, SBH had completed the required priority sector lending for this financial year by December 31, 2011, he added.

The loans which are below Rs 5 lakh will also be eligible for a 25 per cent subsidy from the National Bank for Agriculture and Rural Development.

Mr B. Brahma Naidu, Managing Director of Tirumala Milk Products said farmers would be offered assured buy-back.

nagsridhu@thehindu.co.in

RBI, banks in talks for recast of power sector loans, says SBI

NEW DELHI: Country's largest lender State Bank of India has said that banks are in talks with the Reserve Bank of India on possible restructuring of loans to the power sector projects that are facing problems in implementation.

"We are working with the RBI on how this can be done without the banks being required to make any provisioning," said SBI's Chairman Pratip Chaudhuri.

He, however, clarified that the State Bank of India, which has over Rs 32,000 crore exposure in the power sector, has not yet received any "special request" from the power sector for restructuring of loans. "They are saying that they would be in position to service their debts," said Chaudhuri after having pre-Budget consultation with Finance Minister Pranab Mukherjee. "We are giving loans to all big companies...It's not right for us to equate all the companies," he added.

Chaudhuri said that the risk in power sector is micro not macro and in some cases they (power companies) have said that the implementation of projects have got delayed due to reasons beyond their control.

A recent study by rating agency CRISIL has pointed out that banks' overall exposure of around Rs 56,000-crore to the power sector could be under stress because of losses of distribution companies, who have seen their losses getting doubled to Rs 40,000 crore in 2010-11 from 2008-09.

The finance ministry had asked state-run banks to give company-wise exposure to loans in four stress sectors-aviation, telecom, commercial, real estate and power utilities- which have raised worries that it could spike the bad loans and could derail their lending plans.

The gross non-performing assets, or NPAs, of commercial banks have risen over 25,000 crore in the first six months of the current fiscal. State-run banks wrote off nearly Rs 17,300 crore in 2010-11 against Rs 11,000 in the year before.

As per the latest figures, as on November 30, state-run banks have request for restructuring of 344 loan accounts with an outstanding of Rs 1.65 lakh crore.

Public sector banks had exposure worth over Rs 2.97 lakh crore to the power sector at the end of second quarter of the current fiscal, with maximum credit doled out by SBI.

Source: EconomicTimes