There will be no cut in lending rates as the net interest margin (NIM) is already at 3.09 percent and cannot be allowed to fall below 3 percent, says TM Bhasin, chairman and MD, Indian Bank.
Speaking to CNBC-TV18, he adds that going ahead the net NPA is expected to be less than 2 percent and out of the total slippages of Rs 1,100 crore in Q4, about Rs 650 crore has been recovered.
Below is the edited transcript of the interview on CNBC-TV18
Q: While the total gross non-performing loans (NPLs) of Union Bank and Punjab National Bank (PNB) fell by 30 bps, Indian Bank's gross NPLs went up by 15 bps. Though this indicates the bank's asset quality is still under stress, will it increase in Q1 of FY14 as well?
A: As compared to other banks, Indian Bank's gross and net non-performing assets (NPAs) are considerably lower at 3.33 percent gross and 2.22-2.26 percent net. Our recovery efforts are on and the few major accounts facing stress have been classified as NPAs. Going ahead, I expect gross NPA to be less than 3 percent and net NPA less than 2 percent.
Q: The bank's bad assets have gone up by about Rs 500 crore in the fourth quarter. Do you expect bad assets to go up in the current quarter? Did you have any fresh slippages and restructured assets?
A: Of the total amount of bad assets, about Rs 200 crore is from the textile sector, about Rs 150 crore from the granite sector after a Supreme Court (SC) order halted quarrying activities. The rest of the bad assets are spread across the MSME and the agricultural sector. Total slippages in Q4 amounted to around Rs 1,100 crore out of which about Rs 650 crore has been recovered.
Q: What are your margins this quarter?
A: The margins for this quarter are 3.09 percent.
Q: What were the restructured advances in terms of incremental addition?
A: Restructured advances have gone up by about Rs 1,200 crore.
Q: What are your plans to boost growth in advances in the current year?
A: Last year, advances grew by about 17.53 percent. This year, we have set the target at about 20 percent due to the availability of opportunities.
Q: Do you plan to cut lending rates?
A: I think a decision will be taken by the asset-liability committee (ALCO).
Q: What is your own position?
A: Our base rate is already at 10.20 percent.
Q: Are you likely to cut lending rates?
A: No. It will not be possible because our net interest margin (NIM) is already at 3.09 percent and we do not want it to go below 3 percent.
Q: Are you increasing the pressure on defaulters?
A: Yes. We have started to be ruthless in the recovery of dues. We do not wish to show any mercy on those who have not repaid the bank's loans on time.
Q: The bank has considerable exposure to the textile sector. Do you have any exposure to Reid & Taylor which has been spoken of as being a significant defaulter?
A: We do not have any exposure to Reid & Taylor. The bank has an exposure of about Rs 18 crore to the parent company.