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BANKING

Kumar says India's state-bank reform will bear fruit this year

SBI head outlines path to asset resolution; says sector still shocked by PNB fraud.

The chairman of State Bank of India (SBI) expects around $12 billion of non-performing assets to come off the bank’s books as a consequence of state-owned bank reform and believes that across the whole industry there will be a transformative effect.

Rajnish Kumar, speaking with Euromoney at the Asian Development Bank annual meeting in Manila, believes that despite concerns that bankruptcy and resolution rules are stifling rather than streamlining the process of asset resolution, progress is being made.

“It is working,” he says. “The concerns are whether the rules have become too tight and in particular what will be the impact on the SME sector.

Rajnish_Kuma_FREE-160x186.

Rajnish Kumar,
SBI

“But I think on the whole, the two measures [a revised framework for resolution of distressed assets issued by the Reserve Bank of India (RBI) on February 12 and the launch of the Insolvency Bankruptcy Court] are likely to bring a lot of discipline in the lending and borrowing markets in this country.”

The RBI’s February announcement required that, from March, lenders had 180 days to implement a resolution plan on bad loan accounts of Rs20 billion ($294 million) and above, failing which defaulting borrowers must be referred to insolvency courts.