The government will have to address sector-specific issues in the budget, besides announcing other fiscal measures, said State Bank of India chairman Rajnish Kumar. In an interview, Kumar added that the government needs to take specific steps to help sectors such as real estate, telecom and power distribution companies, which are reeling under stress.
“Some sector-specific steps are required. We have issues around discoms in the power sector. For the real estate sector, we have set up a real estate fund. Telecom issues need to be sorted out. I believe that apart from monetary and fiscal measures that the government may take in the budget to boost demand, addressing sector-specific issues will be important,” said Kumar.
According to estimates, discoms owed ₹67,237 crore in August-end for power bought from generation firms. The inability of discoms to make payments has added to the pain in the banking sector. Similarly, the telecom sector is struggling with large debt, and an adverse court order that directed operators to pay ₹92,000 crore in dues to the government within three months has added to woes. This could have a spillover effect on the banking sector, with its outstanding loan amount and bank guarantee to DoT on behalf of telcos.
Kumar, who is gearing up for the last leg of his term as the head of India’s largest bank, believes 2020 will be the best year in terms of bad loan recoveries. Encouraged by the recovery from the insolvency process involving Essar Steel, he believes there will be recoveries in many large accounts this year. However, he said credit growth will stay an issue in 2020, with the industry seeing loan growth of just 7-8%.
“Last year (FY19) SBI had seen good disbursements and that helped us achieve high credit growth of 13%. Last year we had seen large credit, like NHAI raised ₹25,000 crore and that’s why we came into positive territory. This year (FY20) we are still short and have negative growth from 1 April. Last three months’ growth is positive. Monthly growth is positive. YTD (year to date) growth is still ₹40,000 crore. I wish corporates take more money for working capital needs. Then we are all right,” said Kumar.