Kotak Mahindra Bank has an exposure of Rs 236 crore to four of the 12 large bad loan accounts referred to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code.
On June 13, the Reserve Bank of India (RBI) identified 12 large non-performing assets (NPAs), accounting for over Rs 1.7 lakh crore worth of bad loans, to be immediately filed for insolvency proceedings.
“We have exposure to four accounts and all four accounts were inherited from ING Vysya Bank, which was merged with Kotak Mahindra Bank in April 2015,” said Jaimin Bhatt, Chief Financial Officer of Kotak Bank.
He added that the net exposure is Rs 46 crore and hence has been significantly provided for.
On Thursday, Kotak Mahindra Bank reported a 23 percent rise in net profit for the June quarter to Rs 913 crore driven by higher net interest and other income.
As on June 30, 2017, the gross NPA ratio witnessed a slight increase at 2.58 percent in June 2017 as against 2.50 percent a year ago.
The bank’s other income sequentially dropped 10 percent to Rs 907 crore on account of lower recovery of stressed assets that the bank buys.
Dipak Gupta, Joint Managing Director of the bank said, buying of stressed assets will start picking up now. “Stressed assets buying makes sense if the buyer gets it at a certain price. We have also been waiting for policy measures and now banks may be more comfortable selling them.”
He added that fresh NPA generation may be limited and will not be seen in the large corporate segment. However, with demonetisation and Goods and Services Tax (GST) hiccups, the small and medium enterprises (SMEs) may see some degree of stress.
Cost of '811 Campaign' at Rs 63 crore
Kotak Bank also disclosed that the 811 digital bank account campaign costed Rs 63 crore towards the marketing and other expenses.
In March, in a big-bang announcement, the bank announced 811 — a downloadable bank, which is its digital banking initiative that offers a zero balance savings account with zero charges for all digital transactions.
Bhatt said that the cost of 811 has been big this quarter. “It’s a significant spend so we thought to disclose it.”
On whether the initiative has garnered the expected returns, Gupta said, “It is subjective to say it was an expense more than the returns. We think it was appropriate. It is a new concept and new way of doing business. It is convenient and cheaper for both us and the customers. So, there is an element of awareness building someone had to do and we are fortunate that we were the first ones to do it.”
The initiative has helped banks reduce cost of acquisition of customers at 10 percent of the usual cost incurred.
They did not disclose any data on how much the initiative helped in account opening, but Gupta was quick to add, “811 is a new phenomena and once banks see it being adopted, it will pick up more. It actually streamlines the process of account opening as it is easy to adapt to. We have spent a lot of money on advertising and bringing awareness. Customers just have to become comfortable to it being very easy.”
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