Mumbai, July 1: State Bank of India will fund only globally competitive Indian projects, the bank's chairman MS Verma said.

According to Verma, the bank will focus on four key indicators before financing any projects. "We will take into account the company's global operations and see whether the products meet international standards and can compete in a competitive environment," Verma said.

As a necessary pre-condition to funding, SBI will also insist on advance business strategies of the corporate borrowers for the next five years.

The change in the bank's lending strategy is triggered by the near-removal of import tariff across many product segments, the bank's deputy managing director and chief credit officer BM Bhide said. Earlier, projects that did not meet global standards were still viable due to protection afforded to them through high tariffs coupled with a large domestic market. But with a drastic reduction in the tariff walls the products manufactured by these units now have to compete on a global scale even to survive in the domestic market, Bhide said.

The implication of the State Bank move is enormous since small and medium-scale companies which cannot withstand competition will not be able to source funds from the bank. "We are keen to finance good projects,'' Verma said when asked why small and medium sized companies were not considered for loans.

``The basic problem is not of lack of funds but the lack of good projects. There are hardly any viable projects for us to fund," Verma added.According to SBI officials, growth in advances during the April-June period of this year had been flat with the non-food credit registering a negative growth.

"Despite the cut in the prime lending rate, the credit offtake is unlikely to pick up as no corporates are coming forward with new projects that are viable," a senior State Bank executive said. SBI, the largest commercial bank in the country which had posted a 13.1 per cent (Rs 11,700 crore) growth in its deposits and 8.6 per cent (Rs 4,700 crore) growth in credit in the last fiscal has not been able to register any growth in its credit portfolio this fiscal although the aggregate deposits went by Rs 1,500 crore in the first two months of this fiscal.

In the absence of the non-food credit offtake, the bank is focussing on infrastructure financing in a big way. State Bank of India is in the process of appraising infrastructure projects worth over Rs 30,000 crore and the SBI's exposure to these projects is likely to be pegged at over Rs 5000 crore.

Another factor that has contributed to the dismal credit offtake is the corporates' reluctance to contract loans as they feel the interest rates will soften further in the absence of credit off-take and banks will be forced to disburse at lower rates.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.