B Nayyar, ED, Oriental Bank of Commerce (OBC) says, in an interview to CNBC-TV18, that the balance-sheet has been strengthened with 63-percent provisioning and adds that a 25-bps cut in deposit rates is likely.
Below is the edited transcript of the interview on CNBC-TV18
Q: But for the tax write-back, profit has actually fallen. What caused the fall in profit?
A: The profit is not to be calculated on the basis of a one-off item. The earlier provision for tax was higher. The profit has to be arrived at after taking into account the whole financial year. Our net interest margin (NIM) is 2.82 percent for the quarter and 2.80 percent for the whole year.
Q: What were the slippages and the restructured assets in the fourth quarter?
A: Our provision coverage ratio has increased from 61.20 percent to 63 percent now. Though slippages decreased from Rs 3,900 crore to Rs 3,200 crore in this financial year, provisioning increased from Rs 1,000 crore to Rs 1,500 crore. So we have made higher provisioning of Rs 500 crore despite lower slippages and this has improved our provision ratio. We have focused on strengthening our balance sheet by increasing our provision ratio.
Q: What was the slippage and the restructured assets in Q4?
A: The slippage and restructured assets are to the tune of Rs 900 crore.
Q: What is the level of your restructured assets?
A: For the fourth quarter, we envisage a restructuring of Rs 1,300 crore. One account of Rs 460 crore has been declared as NPA as the restructuring failed. Overall, this has increased our impaired assets (NPA plus restructured assets) which, as compared to March 31, 2012, has come down by Rs 400 crore in March 31 2013.
But NPAs have increased because one single account of Rs 466 crore which instead of being restructured has been declared NPA and that is why it has impacted our reversal of interest by Rs 60 crore.
Q: Your restructured assets in the last quarter were Rs 1,300 crore?
A: Last quarter, the restructured assets were Rs 880 crore against an estimate of Rs 1,300 crore.
Q: What is the latest regarding your exposure to Kingfisher? Have you approached Debt Recovery Tribunal (DRT) and the SARFAESI?
A: Our exposure to Kingfisher per se is very minimal- at Rs 52-53 crore. We have already lodged our claims with Airbus and we expect that to be settled after filing the due process.
Q: What is your expectation of the performance of bad assets in the current quarter?
A: I expect to see a slow down in the performance of bad assets.
Q: What is your expectation on margins?
A: We expect the further deterioration in asset quality to slowdown for the two reasons- there are signs of improvement in the economy thanks to steps taken by the government level to remove uncertainties in sectors like power and road. Further, the government has decided to get stalled projects moving and remove the bottlenecks in delayed projects.
Q: What do you think will be your margins? Will you pass on a rate-cut? What might your margins be for the first quarter?
A: Passing on the rate-cut depends on the kind of the rate cut announced. The repo rate affects liquidity and if the ban’s liquidity is already comfortable there is no question of borrowing from the RBI.
So, it does not impact the cost of funds which hinges on the cost of deposits. If the deposit rate does not come down, the chances of passing on the rate cut will be lower. But there is likelihood that we may reduce the rate of interest on deposits by 25 bps.