UPDATE 3-Sberbank says Putin loan rate demand unrealistic

* Putin says 14 pct acceptable loan rate

* Sberbank says rate unrealistic

* Putin orders Sberbank to keep lending, not close branches

* Sberbank says bad loans at 2.8 pct of its portfolio (Recasts with Gref comments)

By Gleb Braynski and Dmitry Sergeyev

MOSCOW, July 22 (Reuters) - Russian Prime Minister Vladimir Putin on Wednesday ordered banks to dole out more loans at lower rates to get the economy out of recession, but the country's biggest lender said such cheap credit was unrealistic.

Russia's government is looking to banks to help restart economic growth with affordable loans. In return, the sector has received billions of dollars of state funds to boost capital as bad loans rise and asset values fall.

"Of course you need to improve the quality of loans, but you cannot close your portfolio either," Putin said at a meeting of bankers at the headquarters of state-controlled Sberbank. (SBER03.MM) "It's very easy to just shut the box. It is harder to work with clients and understand which of them are reliable."

In a bid to encourage banks to offer more affordable loans, the central bank has slashed interest rates by 200 basis points since April, taking the benchmark refi rate to 11 percent.

Putin told bankers that a loan interest rate at 14 percent "is quite acceptable in current conditions", but Sberbank Chief Executive German Gref told journalists such demands were unrealistic.

"With today's price of central bank money, I do not think banks can reach 14 percent (on loans)," Gref said, noting that the central bank offers funding to the sector through collateral free loans at rates of 12 to 13 percent.

"That is the real cost of money. Then you need to add the bank's margin of at least 3 percent and the result is that minimum (commercial loan rates) are 15 to 16 percent," he said.

Sberbank tends to lead the way for the rest of the sector on decisions to change interest rates for loans or deposits.

Gref forecast 2009 inflation at 12 percent. With the central bank aiming to keep the refinancing rate at or above inflation, that would imply official rates are unlikely to be low enough this year for banks to offer the 14 percent loans that Putin seeks.

BAD LOANS RISE, PROFITS TUMBLE

Putin's comments came minutes before Sberbank published its first-half results to Russian accounting standards, showing its profit tumbled 92 percent year-on-year to 5.3 billion roubles ($170.6 million).

Sberbank's bad loans rose to 2.8 percent of its portfolio by the end of June from 2.6 percent at the start of the month.

Bankers reckon bad loans for the system as a whole have already reached 10 percent according to international standards, MDM Bank chairman Oleg Vyugin said after the bankers met with Putin [ID:nLM83854].

Last month, Putin ordered state banks, including Sberbank, to boost loan portfolios by 150 billion roubles a month between July and September [ID:nLT723598].

Sberbank shares closed 4 percent down underperforming the broader MICEX index

Putin also ordered Sberbank not to close branches.

"A significant part of the (branch) network is not profitable but you cannot abandon it. This is your payment for the state support," he said.

Since the start of the crisis, Sberbank has received 500 billion roubles in subordinated loans from the central bank and is expected to get the same amount again. ($1=31.07 Rouble) (Writing by Toni Vorobyova; editing by Marie Maitre, David Cowell and Karen Foster)