Performing Asset

SBI Chairman Rajnish Kumar is provisioning for bad loans and forecasting increased profitability for the bank, but has risk of default been exorcised?

- Salil Panchal

It’s the last fortnight of 2018. There’s a flurry of activity on the 18th floor of the State Bank of India (SBI) headquarters in the commercial district of Nariman Point in South Mumbai. SBI Chairman Rajnish Kumar, 60, has just completed a round of risk management meetings. There’s not a hint of fatigue on his face though. He swiftly walks into the chamber sporting a slight smile and extends a firm handshake. This was hardly his demeanour when he succeeded Arundhati Bhattacharya as the head of India’s largest lender, on October 7, 2017. But then, circumstances were such.

When Bhattacharya quit, the gross non-performing assets (NPAs) ratio—bad loans as a percentage of total loans—rose to 10.91 percent in March 2018 from 4.95 percent in FY14. The mega six-way merger of five of SBI’s associates—State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank Of Hyderabad, State Bank of Mysore, State Bank of Travancore and Bharatiya Mahila Bank with SBI in 2017—which was touted to boost the bank’s profitability, hurt its earnings. In fact, it ended up ballooning losses and NPAs for the parent bank during 2017.

There could not have been a more challenging time for Kumar, an SBI veteran of over 38 years. He chose to handle the situation in his own calm way. Two days after taking over, he sent an email to all employees, addressing “a severe trust deficit” in India’s financial system and the need for SBI staffers to “promote moral and ethical grandeur unconditionally” in their daily decisions. He also urged them to educate and functionally update themselves in a fast evolving, technology-led world.