Canara Bank aims to keep gross NPLs below 10% this fiscal

Government is yet to communicate to banks regarding disbursement of funds to tackle the stressed asset situation, says TN Manoharan, Chairman of Canara Bank. Some recent reports had suggested that government will give funds to public sector lenders sooner than expected. Speaking to CNBC-TV18, Manoharan doesn’t see the need to raise funds in current fiscal. The bank had raised funds via tier-II bonds worth Rs 3,000 crore in April this year and about Rs 947 crore and Rs 2,400 crore in last fiscal. On the non-performing loans, he says that most of the NPAs have been recognized. “(We) don’t see surprises during the current fiscal,” he says. The bank had reported gross NPAs of 9.4 percent in Q4FY16. The aim is to keep gross NPLs under 10 percent, Manoharan says.Below is the verbatim transcript of TN Manoharan's interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: We heard a lot about public sector undertaking (PSU) bank recapitalisation or capitalisation for the current year coming earlier rather than later, are you privy to anything from the government on capital for your bank itself for Canara Bank?A: Canara Bank received Rs 947 crore in last year and we have been also able to raise through bonds last year to the tune of Rs 2,400 crore and this fiscal April 2016 we could raise Rs 3,000 crore of tier II bonds and Canara Bank as of now we have adequate capital to sustain the growth during the current year. Therefore, we don’t see immediate necessity to go in for raising of any capital. However, as far as the government infusion of capital is concerned, we will have to wait for a suitable announcement at the appropriate time.Latha: They have told you that they are giving you the money earlier this year rather than later. Last year you have received it at the fag-end of the year, like you mentioned about Rs 947 crore, have they indicated to you that this year's money will come in like anytime now?A: Not yet because it is part of Indradhanush recapitalisation of all the banking sector to the tune of Rs 70,000 crore. Therefore we are awaiting communication.Sonia: What about the performance of the bank itself? Last quarter was quite subdued for you, in fact the gross NPAs are virtually at 10 percent now, 9.4 percent to be precise in the last quarter, have things improved at all since the last time we spoke and in terms of slippages would you expect to see any relief in the quarters to come?A: The focus now is on NPA management and recovery. So all robust measures are put on place and we are confident that the level of NPAs will be contained so all measures are on and the field is working effectively and aggressively. Therefore we are confident, things will fall in line and the gross NPA will be well below 10 percent. So we are on the right course of action?Latha: Was there any conversation on recapitalisation bonds with the government?A: Canara Bank is well on course to meet the basel III norms. So we are ahead of the requirement. In fact, by March 2017 even without any further recapitalisation, we will be 11.41 percent as against the regulatory norm of 10.25 percent. Therefore, even without any further raising of capital with what we have raised to the tune of Rs 5,400 crore in the last fiscal as well as in April, the bank is well within the adequate norms and based on our expansion plans for the current fiscal, we will take your view at the end of Q2 whether to go in for further raising of capital or not.Latha: We saw this huge kitchen sinking in Canara Bank in terms of the rise in slippages and gross non-performing assets (NPAs). Your gross NPAs rose by almost 60 percent when you last reported the numbers, what is your sense? Have you recognised most of the bad loans or do you think up until March 2017, we should be continuing to see further deterioration even if it is only incremental?A: Canara Bank has captured most of the NPAs and I don’t see there will be surprises during the current fiscal. Therefore, we are well on course to contain the NPA and with effective recovery mechanism and recently Reserve Bank of India (RBI) has also come out with the S4A measure for this stressed assets of large borrowers. So we are also examining closely on how to use this S4A for leveraging on the slippages in the sense that we can segregate the stressed asset to the tune of 50 percent as sustainable based on the current cash flow and the expected projected cash flow for the next six months and then arrive at what is sustainable and what is unsustainable. So the unsustainable portion will be issued in the form of the -- we will convert it in the form of equity or preferential shares or NCDs and with that kind of a measure, I think things will be in control. So we are looking at using this scheme which has been rolled out on June 13 by RBI.Latha: Can Fin Homes did very good numbers. Would you look at selling off some of your stakes in companies like these Can Fin Homes or any other non-core assets, should we hear something from Canara Bank?A: What we have done recently in the last board meeting is to constitute a special committee headed by executive director having two independent directors as well so this committee will go into the task of monetising or divesting the non-core assets of the bank. So that will encompass our stakes in the subsidiaries and associates as well as the other non-core assets in the form of immovable properties. Therefore, we are awaiting a report from this special committee of the board, which will look into all these aspects and then we will take a strategic view on how to go about monetising our non-core assets either by selling those assets or by divesting our stakes in those assets. So it is under examination.