State Bank of India Breaches Credit Exposure Norms for Three Consecutive Years

Strategic Insights -

India's largest bank, State Bank of India (SBI), has breached credit exposure norms for three consecutive years, revealing significant loans provided to Mukesh Ambani-led Reliance Industries (RIL). The exposure, which exceeded the limits prescribed by the Reserve Bank of India (RBI), was detailed in SBI's annual report for the fiscal year ended March 31, 2011. The breach highlights concerns over the bank's credit risk management, particularly in the wake of high-profile scams and investigations involving the bank's clients.

Key Takeaways:

  • SBI breached credit exposure norms for three consecutive years (2009-10, 2008-09, and 2007-08) due to loans provided to RIL, exceeding the 15% limit of capital funds.
  • RIL was one of four borrowers, including Indian Oil Corp. (IOC), Bharat Heavy Electricals (BHEL), and Tata Group, that exceeded the credit exposure limit in 2009-10.
  • Prior to 2009-10, SBI had exceeded prudential credit limits in 2008-09 for loans to RIL and IOC.
  • The bank's exposure ceiling limits, as per RBI guidelines, are 15% of capital funds for a single borrower and 40% for a borrower group.
  • In 2010-11, SBI's credit exposure to telecom companies was Rs 22,600 crore (3% of its loan book), with Rs 1,500 crore attributed to companies under investigation in the 2G scam.
  • The bank's exposure to Air India was Rs 4,500 crore, while its total exposure in the infrastructure sector was Rs 100,000 crore, with Rs 30,000 crore in the power sector.

Statistics:

  • Rs 22,600 crores (3% of SBI's loan book) was the exposure to telecom companies in 2010-11.
  • Rs 1,500 crores was the exposure to telecom companies under investigation in the 2G scam.
  • Rs 4,500 crores was the exposure to Air India.
  • Rs 100,000 crores was the total exposure in the infrastructure sector, with Rs 30,000 crores in the power sector.
  • Rs 1500 crores was the exposure in cases where the bank exceeded prudential exposure limits.

Sources:

  • (1) State Bank of India, Annual Report for the Fiscal Year Ended March 31, 2011
  • (2) (PTI)