NPA cycle has peaked out for SBI: Prakash Diwan

In a chat with ET Now, Prakash Diwan, Chief Portfolio Strategist, Prakash Diwan's Wealth Circle, shares his views on SBI.

ET Now: Do you think at these levels, State Bank of India is pricing in all the bad news or there is still some more downside left?

Prakash Diwan: I would believe that SBI has already got most of the NPA cycle and the peaking out has already happened. If we were to see any kind of environment which is not benign and NPAs would continue to grow, it would actually impact the entire economy. SBI is more of a proxy to what happens to the quality of credit in the country and if that were to go down, it would be dramatically impacting everybody else as well, but I do not think that is likely to happen.

We could probably see an interest rate cut much sooner than what we thought given the fact that growth has finally stagnated or come down dramatically. SBI could probably start looking at peaking out of its NPA mess and start doing some sort of restructuring and even the financial inclusion part, which was one of the fears that everybody had in terms of the bank spreading themselves too thin on the credit side. That is going to be not on the forefront of the government’s initiatives. That could probably be put on the backburner as well for a while. RBI has not been talking about it. So my sense is SBI should move out of this situation much faster than we think and we would not see more NPAs adding up in the next few quarters.