May 07, 2013 06:55 PM IST | Source: CNBC-TV18

Allahabad Bank labels Orchid A/c as NPA, eyes recovery soon

State-owned Allahabad Bank on Tuesday (May 7 2013) announced its fourth quarter earnings. It posted a 68.5 percent decline in net profit at Rs 126.15 crore on account of rise in bad loans. However company‘s non-performing assets (NPAs) have increased by about Rs 1,600 crore.

State-owned Allahabad Bank on Tuesday (May 7 2013) announced its fourth quarter earnings. It posted a 68.5 percent decline in net profit at Rs 126.15 crore. Company’s non-performing assets (NPAs) increased by about Rs 1,600 crore.

The reason for the jump were nine accounts, which together added Rs 1600 crore to Q4 asset quality stress, Shubhalakshmi Panse, chairman & managing director, Allahabad Bank told CNBC-TV18.

She also informed that the bank's Orchid Chem account has been classified as an NPA. "There are some 18 banks involved and out of this one bank did not give clearance as money was not distributed and thus the account became NPA," she says.

Below is the verbatim transcript of his interview to CNBC-TV18

Q: These numbers are a bit disconcerting. Your gross non-performing assets (NPAs) have increased by about Rs 1,600 crore, from Rs 3,500 crore they have gone up all the way to Rs 5,100 crore. What happened? Was it one big slippage? What was the fresh slippages and where there any big accounts?

A: Yes, there have been fresh slippages in the last quarter because most of these accounts, companies were waiting for corporate debt restructuring (CDR). So, they let the accounts become NPAs.

The big accounts with us is Kemrock Industries Rs 471 crore, Sterling Industries Rs 240 crore, Surya Vinayak Rs 314 crore, Orchid Chemicals Rs 230 crore, Websol Industries Rs 70 crore and the list goes on. Nine accounts have added Rs 1,600 crore to the NPA in the last quarter and that is the reason for the sudden jump.

Q: What will you do with them? We would like to know whether there will also be more such in the current quarter?

A: Some of the accounts are going into the CDR. That’s why they waited and they have now gone for CDR because through it they would be now coming in and getting a restructured package. However, there are some accounts where they came to ask for CDR permission.

We came to know that a company’s total dues are Rs 53 crore, but the total hit the bank was going to take on diminishing face value was to the extent of Rs 21 crore. When we dug deep into the balance sheet we realised that last year the company had a profit of Rs 25 crore, this year they have declared a loss of Rs 125 crore.

So, when we asked them they said we have written off book debts to the extent of Rs 92 crore. So, for such accounts we are not agreeing for CDR and we will make it NPA and we will immediately go in for recovery procedures.

Q: I heard you say Orchid Chemicals. Could you tell us the total exposure and are you classifying that as an NPA, all of that?

A: It has already become NPA, Rs 230 crore because there are some 18 banks involved. I believe there is an investor who has already brought in money. However, the money has not been distributed by the bank with which it is deposited because the bank was waiting for clearance from all the banks.

Of the 18 banks, 17 banks have given the clearance, for one bank the money was not distributed. That is why the account became NPA. Once the last bank comes the concerned bank will distribute the money and this account will immediately come out of NPA.

Q: Let’s talk about your restructured assets – that is Rs 14,875 crore. How much was added in this Q4?

A: It was is to the extent of Rs 1,970 crore.

Q: Which are the big accounts that comprise this Rs 14,870 crore?

A: Our largest share in the restructured assets during this year, which we have added is to the extent of Rs 8,522 crore, of this Rs 6,297 crore is from the discoms that means from Rajasthan, Uttar Pradesh (UP) and Haryana. So, they itself contribute to the extent of Rs 6,297 crore then we have Air India which has also contributed. So, these are some of the large accounts, which have got added.

I also have a huge exposure in iron and steel because there also Ramswaroop all these have been added into the CDR portfolio. Then Electrotherm is also added into that.

Q: Just a word on the net interest income (NII) as well. As we take your point on some of these NPAs, and they could be one-offs but even NII has fallen. That’s also something which hasn’t gone down too well with the market. What’s the primary reason for that?

A: If you look at the NII, I will just divide into two theories. The first reason is that our yield on advances has come down because we have reduced our base rate to 10.20 percent. From 10.75 percent which was last year to 10.50 percent and 10.20 percent in two tranche.

The second is interest reversal on account of fresh accretion of NPA has been to the extent of Rs 330 crore. So, this amount has reversed which has had an impact on the NII. We have also had to the rate of interest on the restructured portfolio. Taken together, all this has had an impact on the NII.

As far as the cost of deposits is concerned, cost of deposit even though we have tried to off load the bulk deposits, it does not come in tandem. It happens in yield on advances because only after the deposit gets matured then there is a reduction in the cost of deposits.


Q: How will things pan out in the current quarter and in the next? Is there any list of companies that you are looking at? Any approximate number because we are half way into this quarter?

A: As far as Orchid Chemicals is concerned, we are sure it is going to come out of NPA. As far as Sterling is concerned, that entire group, I think they are being given a corporate debt restructuring (CDR) package.

So, there also because they have oil from Nigeria so they will be bringing some money in so account will get upgraded. There is going to be a substantial recovery in these two accounts in this quarter itself. If you look at our recovery figures, during last two quarters - in December quarter and this quarter, we have made a recovery of Rs 1,700 crore, which is huge.

Going forward also we are going to continue our recovery efforts. We are very sure, like last quarters, we will be ending this quarter also to the extent of Rs 700-800 crore recovery. Going forward, we are very gung-ho as far as recovery is concerned. As far as portfolio is concerned, there are no big accounts which are now remaining in the portfolio.

Q: You would still have to provide for more, isn’t it? Because restructured assets will require a 2.75 percent in terms of provisioning?

A: We have already provided for that. It is only after making a provision that this net profit has come. So that provisioning we have already done.

Q: What are you expecting therefore in terms of growth? Will you expect these two quarters to be quarters where you will not look for growth, but more for stability?

A: These two quarters, June quarter and September quarter as we all know for the bankers it is a rather subdued quarters. So, these two quarters we would be concentrating on two things – one is on the retail portfolio, Micro, Small and Medium Enterprises (MSME) portfolio and recovery portfolio.

In recovery, our hands are full and we will be concentrating on that.With best of the results, by September quarter, we are sure that we will show very good results in the next two quarters.

Q: There is no DICOM which has shown any final stages of coming to the bailout package. In any of those cases, will you get any relief?

A: We will be getting a relief because we have just received a circular from RBI. There it has been decided that on that particular portfolio we will be getting which gets converted into bonds - 8.88 percent plus 50. To that extent, we will be getting a return. It will go into the investment portfolio and it will be out of the restructured portfolio. We are making a provision of 2.75 percent so to that extent the provision will be returned back.

Q: Which state is giving you these bonds? Has any state agreed?

A: As far as Rajasthan is concerned, yes the discussions are there and we have been told that the discussion is in the last stage. As far as Haryana is concerned also, the discussions are on. So we should be hearing from them shortly.

As far as UP is concerned, we are yet to hear from them because at least these two states where our exposure is substantial, we are very sure if something happens, there will be a substantial write back from the restructured portfolio because this entire thing will go and sit in the investment portfolio.

Q: A word on that Cobrapost allegation because your bank’s name was also mentioned in that sting?

A: As far as Cobrapost is concerned our one branch that is Parliament Street branch was visited where some inquiries were made upon depositing of cash and converting it into an LIC. So, LIC gentleman was also there. However, our officials have very categorically told that we would be requiring pan card, without the pan card we will not be accepting any cash.

Secondly, at the end of the interview if you see in the transcript also the official from the Allahabad Bank has said “in Allahabad Bank we will be following all the rules and regulations”. Having said this we have already come out with a communiqué to all the branches that they must follow all the rules and regulations, anybody found wanting we would be taking strictest of actions.

Follow us on
Available On