Poor rains add to bank woes; experts see FY13 NPLs at 4.2%

Q: What about incremental lending? How strict are you in terms of exposure to a certain amount sectors in terms of incremental lending going forward? Which would these sectors be and how exactly do you think it will possibly affect your overall credit growth?

Mundra: I would like to briefly go back to the earlier point. I was not speaking from the high moral ground when I am talking about the nation building. The point I was trying to make that the banking system cannot be decoupled with the reality in the national economy and there are evidences as I mentioned in the Europe that if banks are becoming totally alienated from that and looking for safe haven, ultimately it bounces back.

The point I was trying to make that if we slightly look at the medium to long term and clearly not focus on very quarter to quarter kind of thing, I think this is a right strategy. Mr. Ananda also recently mentioned. So that is the point I am trying to make that it may look painful in the quarter which has gone or the quarter which is on. But going forward it is going to be a right strategy. I have a firm belief in it.

Second, as far as the wiping of the capital and the scary situation, let me tell you, if you look at the Indian context the ratio of NPA to the capital, I think it is better than what it is prevailing in UK, USA, Japan, Spain, Italy and a host of other countries. You can find these figures in the RBIs stability report. These are the two points I wanted to make.

Coming to your question, yes restructuring book, there are cases and as we look at things, maybe in current quarter or coming quarter there would be cases which keep on coming for restructuring. But yes if a banker is not learning from the past I think then he is not true to his profession.

Surely we have taken the right lessons from all the past cases, all the past instances. To that extent the due diligence process, the other parameters, the sectors where we would like to have incremental exposure and the sectors where we would not like to have exposure, I think for last 1.5 years, with lot of focus we have been working in that direction.

Q: Do you think that we are going to see additional restructured assets and NPLs in the coming quarters? According to you where might the system find the peaking of both these categories of assets?

Mundra: I think again two questions. As far as the GDP growth is concerned, I would not like to comment on the figures. I am not so qualified eminent economist and analyst. I think they have given their projection and I would like to stand in middle of them. So, that is it.

As far as restructuring of NPA is concerned as I mentioned looking to the overall condition now this is the process. When you are doing banking, you are doing business - it would never be so that in any quarters there is no fresh NPA or no fresh restructuring or slippage.

But the point is that if your recovery, if your upgradation is also equally strong and you have a good profitability then the end result is something which is quite manageable.

Q: What is the figure you would work with if at all in terms of the worst possible case, 4%? Where do you see it ending?

Bhoumik: We are relooking at these numbers virtually every month. We started by having a forecast of 3.75% gross NPL expectation reported for March 13 - that was beginning of this year. Now we are already up to 4-4.2%. We are going to really figure out to see when is all this going to bounce back. This is clearly the longest and the deepest slowdown we have seen in 10 years. So, we probably still have some more pain to go.