Borrowing costs down but yield pressure stays: PTC India Fin

Cost of borrowings has come down but there is some pressure on the yield side, says Ashok Haldia, MD & CEO of PTC India Financial Services.

The focus has been shifting to lowering the cost of borrowing, he said in an interview to CNBC-TV18, adding, spread and net interest margins are likely to be maintained going ahead.

He also shared details on the stressed assets and strategy to handle non-performing (NPA) accounts.  Below is the verbatim transcript of Ashok Haldia’s interview to Anuj Singhal & Latha Venkatesh on CNBC-TV18.Latha: Are things any better, let me start with the probably where good news would be coming. Has cost of money fallen, have you all taken advantage of this debenture boom, should we expect your spreads to be a little better in current and next quarter?A: The cost of financing and the yield on the financing are always a challenging proposition for any financial institutions. While the cost of borrowings are coming down and we are taking full advantage of that there is at the same time pressure on the yields the interest rate that we charge from the borrowers and particularly when in the arena of a competitive financing. We are quite conscious of the fact and therefore our focus has been shifting greatly to reducing our cost of borrowing. We have been successful to a great extent; we are looking into innovative products and innovative means of financing. At the same time we are also trying to maintain the yield to the extent possible on the lending. However, let me tell you that if it comes to the pressure on the spread on the margin we would not like to compromise on the quality of the portfolio that is for sure.Latha: Let me then talk about the quality of the portfolio. You had a fairly difficult non-performing assets (NPA) number 5.3 percent gross NPAs have any of them paid back? Do we stabilise at 5.3, will it be lower in the coming months? A: Let me tell you when I appeared for an interview in your channel last occasion I said that the stress assets for that matter those standard restructure as well as NPA is something around Rs 800 to Rs 1,000 crore and I believe that is around the figure where this number might be stabilising. Having said that last quarter was an unusual quarter in non banking financial companies (NBFC) when you have the period of the what Reserve Bank of India (RBI) calls as NPA is reduced from 150 days to 120 days there were certain debts which we were not able to recover on the last day fully. We did recover partially and therefore those were converted into an NPA. We are dealing with all the NPAs in the stress accounts, in fact we are in the process of churning them out. If we are engaged with the promoters and the projects either in the hands of the existing promoters they are able to revive them with our assistance. They are able to pay us back maybe through the assets of the projects or otherwise or there are new investors showing interest in to that and we are also talking to lead lenders. Let me tell you as the result of all this exercise the direction has been positive. We might be able to recover some amount maybe in the coming quarters out of those NPAs, may be we are able to churn them out. Since we were covered by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, (Sarfaesi) last month and before and we are already taken action in the two of such cases and we hope a positive outcome after that exercise. So, let me tell you while the figure might change from quarter to quarter because you are dealing with all those NPAs some of the NPAs may start paying you off some of the stress assets that we are in the process of churning out may lead to a finality and may be some of them yield the results and may be some of them as a lender we are required to take it. Latha: I am not holding to a quarter, by the end of the year will this Rs 528 crore of gross NPAs look any lower? A: I would not able to tell you the futuristic number, but I will certainly tell you that we are constantly engaged with them and hopefully we should be able to see some positive direction. Anuj: Getting back to the original question on spreads and also on your net interest margin (NIM) 4.6 percent for quarter one it used to be of course closer to 6 percent any guidance on that front? A: This 6 percent when we were having we have to relate the margins to the capital adequacy norm at the percentage that we were having. We raised or capital and we raised or resources and we were in the process of deploying. As those were increasingly deployed in terms of the leverage that we can have under the RBI norms the NIM was coming down. So, the lower NIM was in fact also an indication or ability to leverage our capital more. I would say that as you are trying to maintain the spread as and so we should also be able to maintain the NIM.

Correction:  Ashok Haldia had earlier quoted a figure of Rs 8,000-10,000 crore when asked about non-performing assets. He had actually meant Rs 800-1,000 crore.