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Seek more time to repay corporate loans: SBI

Kolkata, August 29: “The other day, we received a (loan) proposal for setting up a hotel, with a repayment period of eight to nine years. I told my officers ask this gentleman to take the loan for 12-13 years...Our advice is in the future, whenever you are applying for a loan, try to negotiate for a longer repayment tenure,” said Chairman Pratip Chaudhuri.

Such advice is aimed at capping a further rise in the bank’s restructured loan portfolio. In 2011-12, SBI’s restructured loan portfolio nearly doubled to Rs 8,093 crore from Rs 4,979 crore a year earlier. In the quarter ended June, the bank restructured loans worth Rs 564 crore. At the end of June, SBI’s total restructured loan portfolio stood at Rs 36,904 crore. Of these, loans worth Rs 7,373 crore were classified as non-performing assets. The Reserve Bank of India (RBI) has proposed tough norms for loan restructuring, and if the new rules are implemented, the provision burden on the bank would rise, eroding its profitability further.

Chaudhuri added SBI would not penalise its borrowers if they wanted to pre-pay loans ahead of the repayment schedule. “In the current scenario, with the rules RBI has proposed, it is difficult to increase the tenure after the loan is sanctioned. It would increase the burden on the bank. So, we are telling our customers to negotiate for more time. If one is able to repay ahead of the schedule, it is fine — there would be no penalty for pre-payment,” he said.

However, most banks were reluctant to agree. “The repayment period is based on the projected cash flow. The schedule is fixed after making a conservative assessment of the earnings, and taking into consideration the risk factor. We have no immediate plans to deviate from this practice,” said the chairman and managing director of a Mumbai-based public sector bank, requesting anonymity.

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