Finance ministry to check debt provisions by SBI

State Bank Of IndiaThe Finance ministry has observed that the State Bank of India (SBI) is not making provisions for bad loans under agriculture debt relief scheme. The ministry may ask the bank to give an explanation, indicated a ministry official.

The ministry official expressed that all other public sector banks have made adequate provisions for such loans while the SBI has not taken adequate steps. The government had expected SBI to lead other banks in making provisions for such non performing assets.

If the country's biggest bank had made adequate provisions for the nonperforming loans arising out of the farm loan waiver scheme it would have recorded a decline in net profit for the third quarter of the current financial year.

SBI's net profit rose by Rs 1 crore to Rs 2,479 crore in the third quarter from corresponding period last year.

The ministry noted that the bank's provision coverage ratio was amongst the lowest among banks and it sends out a wrong signal to the smaller banks operating in the field.

Reserve bank of India has mandated a provision coverage ratio of 70% while that for SBI stood at 56.19%.

The bank has expressed that it has adhered to all norms and conditions and the accounts if turn into NPA's, will be adjusted in the next quarter. SBI had earlier recorded a net increase of Rs 1,485 crore in its bad loans in the third quarter.

In another development, SBI announced on Sunday that it has a capital requirement of Rs 50,000 crore over the next five years. SBI Chairman O P Bhatt said about half of this amount will come from internal accruals while the remaining will be raised.

He also said that about Rs 15-20,000 crore will be raised through equity shares in the next two years. He also added that the bank has excess liquidity of Rs 75,000 crore, as on December 31. SBI is also hopeful of the merger with State Bank of Indore going through soon.