41: SBI brings a ray of hope amid a despondent pandemic, Is it overconfident?

India’s largest lender, State Bank of India sounded optimistic on delinquencies in a year when every other bank is predicting a surge in bad assets. The coronavirus pandemic is expected to increase unemployment and push many small businesses into bankruptcy. That pain is sure to be reflected in SBI’s asset quality. But chairman Rajnish Kumar is hopeful that this pain would be limited. As such, only 23% of the bank’s loan book is under moratorium. The repayment holiday which was allowed by the regulator is for six months to borrowers. While SBI expects to keep its bad loans under check, it has opted to make higher provisions. It has also gone a step ahead and decided not to take the benefit of forbearance on loans where repayment schedules were altered. In other words, though SBI did not mark loans as non-performing, it has provided against them like they would be a bad asset. SBI’s shares surged over 8% on Friday because of this optimistic guidance and the highest yearly net profit it reported for FY20. The bank has however said that it would be prudent to assess borrowers and their repayment strength once the moratorium is over in August. A clear picture will emerge only in September.