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SBI chief sees bad loan provision falling after two quarters

State Bank of India (SBI) Chairman Rajnish Kumar speaks at a banking conference in Mumbai, August 20, 2018. REUTERS/Francis Mascarenhas/Files

NUSA DUA, Indonesia (Reuters) - State Bank of India, the country’s largest lender, sees its provision for bad loans remaining high for at least the next two quarters, after which it will start softening as it steps up efforts to improve asset quality, its chairman said on Friday.

The state-run lender is also seeing a slowdown in “accretion” of new bad loans, Rajnish Kumar told Reuters on the sidelines of the International Monetary Fund (IMF) meeting at the Indonesian resort island of Bali.

India’s banks have been plagued by a surge in non-performing loans which hit a record $150 billion at the end of March. Twenty-one lenders led by SBI, in which the Indian government owns a majority stake, accounted for 86 percent of the pile.

“Whatever is the provision coverage...that will still remain elevated for at least two quarters and after that it should start tapering off, the requirement to do more coverage,” Kumar said. “Overall, NPAs (non-performing loans) are under control.”

SBI, which accounts for about a fifth of India’s banking assets, saw its provisions for bad loans rising 7.5 percent in the June quarter from a year earlier, pulling it to its third straight quarter of losses.

The lender is one of the top shareholders in India’s ailing shadow banking firm Infrastructure Leasing & Financial Services (IL&FS), which has been taken over by the government on worries about the impact of its collapse on the financial markets.

“There are some projects where they have disputed claims. They really need to determine very quickly, which I’m sure the new board will be doing, how much money is recoverable and if there’s any gap then how do we address that gap.”

Reporting by Sumeet Chatterjee; Editing by Muralikumar Anantharaman