NS Venkatesh, ED of Lakshmi Vilas Bank
expects to see robust demand on the retail and micro, small & medium enterprises (MSME) side of the business. "We have grown our advances year-on-year to the extent of 15 percent. Hopefully, this year we should close at around 16-17 percent growth", he said.Below is the verbatim transcript of NS Venkatesh's interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: The last time you had indicated to us that asset quality would remain sturdy as most of your stressed accounts have either been classified as non-performing assets (NPAs) or sold to asset reconstruction companies (ARCs) but we have seen a deterioration in your asset quality, what went wrong and by the end of FY17, where do you see the gross NPAs?A:
Essentially last time when we were talking, we were saying that some stress is there. So maybe around 15-20 bps we were seeing an uptrend in the gross NPA but what has suddenly happened is some one-offs incidents have happened based on which some large accounts had turned bad -- one is a bill discounting facility which has gone bad in Tamil Nadu. It is a timber trade related facility. We are now taking action on that. Hopefully, we should be able to recover a substantial portion in the coming quarter.
The other one is one larger account got slipped in Delhi, which we were not anticipating that it will get slipped. It is in the food processing industry in Delhi. So that got slipped. So these were the two chunky accounts, which had come and hit us one was Rs 75 crore timber trade and another was somewhere around Rs 65 crore into the food processing. So that is around Rs 140 crore out of the Rs 174 crore fresh slippages had slipped.
However, we believe that we have put enough checks and controls in a place.Latha: What is the trend for the current and the next quarters, are you all getting a sense that there is further weakness to come in the MSME and such accounts or is the worst or the pain over?A:
Out of this -- if you take away those two accounts then the balance accounts are very small. That is hardly around Rs 1 crore, so for these small accounts will be very difficult at this particular point of time to give you an indication as to what will happen but let us assume that in Q1 also we had somewhere around Rs 64 crore of fresh accretion. This quarter if you take away these two accounts then maybe it comes to around Rs 34-35 crore of accretion. So hopefully, we should see that sort of an accretion going ahead -- Rs 50-60 crore accretion going ahead -- in two of those remaining quarters which can happen. We are definitely watchful of those large accounts, which are there with us. Hopefully, it should not slip into the NPA category.Latha: You are looking to raise capital, how much?A:
Essentially there was an enabling resolution, which got passed in yesterday's board meeting, which says that the bank can raise capital. However, at this particular point of time, they have authorised the capital raising committee to take the decision. So they have not yet met, maybe when the time is appropriate, they will meet.
Definitely, we need capital because our capital adequacy ratio also is not having that sort of a big cushion. So hopefully we should tap the market but the timing, the size has not yet been decided.Latha: Even the ballpark size also is not something you would look for. For instance, what is your capital adequacy now, what would you like it to be?A:
At this particular moment, whatever we have put out is somewhere around 10.10 as the capital adequacy. That doesn’t include the half year profits which you add. If you add the half year profits then it adds at least another 100 bps to the capital adequacy. We have an enabling resolution which says 4.25 crore of shares can be offered but we have not yet sized the issue or timed the issue at this particular point of time. The capital raising committee is yet to meet and decide.Sonia: I wanted to talk a little bit about your retail loan book as well. 20 percent of your retail loan book comes in from loan against property (LAP) and over there we are seeing some amount of issues with respect to defaults etc, are you facing any problems here?A:
There were some reports, which had come out from some of the rating agencies saying that there is stress on LAP sort of business but when we had looked at our portfolio, we don’t see that sort of stress coming in from the loan against portfolio property. The normal -- that would be there between 0.3 percent and 0.4 percent that stress always remains but other than we are not seeing any alarming signals of the LAP portfolio behaving in an erratic manner.Latha: What kind of growth prospects?A:
Essentially, in first half also we have grown our advances year-on-year to the extent of 15 percent. The loan in the retail segment, the MSME segment, agri segment is expected to increase especially after the good monsoon and all, some consumptions will also come into place. So on the retail side, we will see some robust demand, in MSME also we will see some robust demand. So hopefully, this year we should close at around 16-17 percent growth.