India’s biggest lender, State Bank of India’s recovery in the recent scenario paves the way for others in the industry as Indian banks are gearing up for a tough battle when it comes to getting back money from defaulters in a post-pandemic world.
SBI’s recoveries and upgrades sunk by 21 percent year-on-year in the first six months of the fiscal year 2020-2021. What’s more worrisome is that past recoveries from written-off accounts dropped by over 40 percent. Hence, these recoveries have been extremely low due to backlashes from COVID-19. Banks revamp recovery efforts not only for bad loans but also those bad loans that have long been written-off as hopeless.
SBI holds one of the most robust stressed asset management processes as well as has the balance sheet might to recover the money, all by the virtue of being the biggest lender. SBI’s peers in the public sector typically look up to SBI for guidance in stress management. Therefore, SBI’s low recovery numbers predict a troubled future.
The bank’s management has hinted that the recoveries would increase as the economic conditions begin to improve. That being said, companies especially small businesses will take a long time to be back in action. Keep in mind that much of the potential stress won’t be visible on bank balance sheets due to forbearance by the Reserve Bank of India (RBI) and the government’s credit guarantee support to companies. Low visibility on bad loans is a challenge for SBI, even as efforts for recovery need a push.
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