Recoveries improved asset quality; see NPAs at 1.6%: BoI

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Recoveries improved asset quality; see NPAs at 1.6%: BoI

By way of recovery and upgradation, Bank of India’s executive director N Seshadri tells CNBC-TV18 that the asset quality of the bank has been consistently improving.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See latest News about Bank of India See previous management interviews See what other Experts & Brokerages are saying about Bank of India Bank of India BSE | NSE 31/05/12 Are Mutual Funds betting on Bank of India?

By way of recovery and upgradation, Bank of India 's executive director N Seshadri tells CNBC-TV18 that the asset quality of the bank has been consistently improving. After a series of quarters where bad debts increased, the non-performing assets for the bank fell by Rs 200 crore. Speaking about the same, Seshadri explains that "Rs 200 crores mentioned is after taking into account a massive Rs 500 crore of exposure on account of one single account. Otherwise in terms of recovery and upgradation it was almost Rs 800 crores."

The gross slippages for the bank came in around Rs 900 crore, and Seshadri added that GTL was one company that came into restructured accounts. "All other restructured accounts were small or medium," he added.

Going forwards, Bank of India expects NPAs to improve from the current 2.78% at the gross level to 2.5%. "On a net basis, we see it at 1.55-1.6% from 1.78," said Seshadri.

Below is an edited transcript of his interview with Latha Venkatesh and Sonia Shenoy. Also watch the accompanying video.

Q: While gross and net NPL figures were heart warming, there were problems with respect to restructured accounts and slippages. Your presentation says that the total slippages only for the quarter were at Rs 513 crore. Now are these gross slippages or have you netted out something and if you have netted out, what is it?

A: We have shared in the presentation that there has been a good amount of recovery happening in small value accounts and we did not see much of a slippage happening on the medium and large segment. We had one large exposure related to aviation which slipped this quarter and by and large the net slippage that we have seen is on account of this slippage.

What's happening in respect of small and medium accounts are while there is definitely some restructuring which we are required to do on account of global scenario, we are seeing most of them respond to recovery on the small value. In fact on a net basis, it was Rs 519 crore, but if you look to the gross basis we had almost about Rs 900 crores of recovery happening and we have netted the slippages.

Q: Without netting am I to understand it would have been Rs 1400 crore slippages?

A: Its not Rs 1400 crore its Rs 900 crore and then Rs 400 crore basically has happened on account of recovery of small value accounts which really was a NPA during the intra quarter.

Q: So the gross number may have been Rs 900 crore?

A: May have been Rs 900 crore and then some of them were on account of slippages during the quarter and even the previous quarter. You would appreciate in small value accounts it is very difficult to track. It is easy for a large value accounts to be tracked on a quarter on quarter basis, small value account we have a challenge there.

Q: Just talking more about the restructured loans and how much it has shot up this time around, at what percentage of your total loan book does the restructured loans stand at and how much do you think you can bring it down to maybe by the end of the year or the first half of next year?

A: No. Restructuring is part of the entire process which is happening in the external environment. I don't think the bank will have much of a control as to which accounts comes as restructuring. The total amount of restructuring is still about 22-23% which we have seen in the earlier period, but what is important is most of the restructured accounts have been responding to the restructuring because this time we have taken into account the extent of the problem and we have done a meaningful restructuring which was not the case one and a half years back.

Going forward, we will definitely have some more accounts coming for restructuring but what we are making sure is that they are restructured in full measure. Second is the net present value, which in fact the bank has to get adjusted by way of free looking at the post restructuring return on those assets.

Q: You said that the Rs 900 crore gross slippages include some accounts which slipped in the quarter and again came back?

A: Small value accounts.

Q: They slipped for a bit and then they slipped back into standard accounts, is that why you have chosen to give us the net value?

A: That is right. In fact there is a slippage which happens in small value accounts and most of them respond to the recovery immediately because we are recognizing exactly on the 90thday no matter what is the size of loan every asset categorizes as NPA and we are able to recover substantial portion of it.

Q: With respect to restructured accounts, can you tell us what the big accounts that got restructured were? GTL was definitely one of the big accounts, were there similar such huge accounts or were they large number of small accounts?

A: Small accounts; GTL was a big name being restructured. We still have some accounts which are in the Rs 40-50 crore region which all have been restructured and there is a good business model which is available there and they would respond to the restructuring that we have taken up.