InvestorQ : How will the new spate of farmer bad loans impact the PSU banks like State Bank of India (SBI) in India?
Mitali Bhutta made post

How will the new spate of farmer bad loans impact the PSU banks like State Bank of India (SBI) in India?

Answer
user profile image
Dawn Cherian answered.
7 months ago


It will certainly be negative because when the markets were hoping that the NPA cycle was bottoming, we suddenly have a Rs.60,000 crore bombshell. Farm loan waivers in the states of Uttar Pradesh, Tamil Nadu, Maharashtra and Punjab have added nearly Rs.60,000 crore of bad loans to the books of SBI in the third quarter. This will be largely negative for the expectations of a recovery in the state PSU banks. In fact, some of the brokers like Macquarie have already warned that PSU banks could face increase stress from farm loans, waivers, SME loans and even from retail credit in the coming weeks. For SBI, that was beginning to enjoy the benefits of SOTP, this poses a new kind of a problem for the valuation of SBI.