State Bank of India (SBI) has resolved differences with the central bank over classification of bad loans, according to bank’s chairman OP Bhatt. He said the bank has addressed the differences by increasing provisioning in some cases and, in other cases, convincing the Reserve Bank of India (RBI) that its provisions are adequate.
“The bank has 15 auditors on its panel and all of them have been appointed by the RBI. So, there is no case that the bank mis-stated its financial performance,” said Mr Bhatt, responding to media queries on RBI’s inspection report for March 2009, which said that SBI has not classified a substantial portion of its loan as bad loans, which in turn helped them show higher profit.
“There have been some genuine interpretation differences. The issue has now been resolved. So, either they have accepted our argument or we have provided for the loan,” he added. The bank had set aside Rs7,076 crore in the first half of this fiscal year, up 91% over the corresponding quarter.
On retail bond issue, Mr Bhatt pointed out that the bank would like to tap the retail market with a bond issuance every quarter.
On the rights issue which the bank plans to launch by the end of this fiscal year, Mr Bhatt said that bank has received a verbal approval for the rights issue, although the bank has to yet receive a written approval. The government would need to invest close to Rs12,000 crore to retain its share in the bank.
He added that the government would either choose to invest in rights issue or keep its cash neutral. In the past rights issue, the government had issued Rs10,000-crore bonds and the bonds were subscribed by the bank, so that they there is no immediate pressure on fisc.
Meanwhile, he said that SBI is in advance stage of planning its maiden euro bond issue which will have a tenure of five years.
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