SBI to raise NPA cover if needed

The country’s largest lender, State Bank of India (SBI), On Monday said its provisions on bad loans were adequate, but the cover might be increased if the need arose.

The Reserve Bank of India recently asked the lender to increase the provision coverage ratio (PCR) of 38.72 per cent, which is far below the industry average, to 50 per cent at least.

“Generally, the PCR is 40 per cent. But the apex bank has been indicating that it should be at least 50 per cent,” SBI Chief Financial Officer S Ranjan said. Ranjan attributed the low provisioning to a single large account, which had earlier been classified as a non performing asset (NPA).

“That (low PCR) is because one account, Dabhol, got classified as an NPA last year. It will now be re-classified as a standard asset. Automatically, the provision will go up to 43 per cent,” Ranjan said. The lender was also seeking options to further hike the provision coverage and will evolve policies to execute the plan, he said.

He asserted that there is no dangerous signal with regard to NPAs in the bank and said it has adequaTelephoney provided for covering of its bad loans.

Courtesy: Business Standard (July 21, 2009)