Mumbai, Nov 16: In a strategic shift, the State Bank of India has decided to target the trade, transport, agriculture, small-scale and housing finance segments to boost its advances portfolio in the current fiscal.

This marks a major change in the business focus of the country's largest commercial bank which had created the corporate accounts group (CAG) just two years ago to cater to high-value corporate clientele. The CAG was instituted following the recommendations of global consultancy agency McKinsey.

Admitting that all triple-A rated corporates are accessing funds at sub-prime lending rates (PLR) through commercial paper (CPs), non-convertible debentures and preference shares, State Bank chairman MS Verma said real credit offtake can only be triggered by smaller units.

Unveiling his gameplan to boost credit offtake, Verma said: "We are aggressively going into trade finance, housing finance, agricultural loans, small-scale industry and the transport sector. The main thrust is in the areas of trade finance and housing." The bank will open gold counters at 50 select branches over the next two months. It plans to disburse Rs 200 crore this fiscal in the retail housing finance segment.

"If our plans in the trade sector succeed, there will be very substantial credit offtake. This is a segment which has not received the attention of commercial banks in a big way. And once this sector's requirements are met ..there will be both loans as well as other types of products like remittance facilities... It is a very lucrative business," Verma said.

Although the spreads are under severe strain, the State Bank is compelled to pick up CPs at cheaper rates as otherwise its clients may move out. "If we want to prevent the movement of our clients, we will have to subscribe to their CPs," Verma said. The outstandings of the larger corporates in State Bank's books are coming down as they are converting a portion of their loans to CPs and NCDs, Verma said.

The strategy is to increase asset volumes to make up for the drop in margins and finer spreads. "It is the trend worldwide. A certain segment of my loan book will be at very fine rates because these are triple-A rated clients. But whatever I lose here I will have to make up through increased turnover which will take care of my profits," Verma said, adding the margins will definitely come down and this cannot be stopped.

The State Bank chief also admitted that the bank's non-performing assets have grown in the first half of the current fiscal as a fallout of the industrial slowdown.

However, it will not be reflected in the bank's net non-performing assets figure as it has been able to recover a large chunk of bad debts in the April-September period.

The global rating agency Moody's has recently expressed concern about State Bank's non-performing assets. "We are trying hard through recoveries and write-offs to bring down our NPAs. At the moment, the net NPA is pegged at 7.3 per cent. There might be a marginal improvement... but that is all," he said.

Verma ruled out the possibility of a substantial improvement in the NPA level as "the industry has not been in a very good shape in the first six months".

Even though the bank might have recovered Rs 1,000 crore during this period, almost an equal amount must have been added to bad loans, he said.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.