Exposure to power sub-7%, Sept 1 order to give clarity: BoB

Below is the transcript of Ranjan Dhawan’s interview to CNBC-TV18’s Ekta Batra and Reema TendulkarEkta: We have been speaking to multiple bankers to assess the impact of the Supreme Court and what they had to say yesterday and right now all of the bankers have told us that it is too early to assess the impact as of now. We have to wait by and see how the situation develops. Can you start by telling us what Bank of Baroda’s (BoB) exposure to the power space is at this point and whether you have managed to do any homework to assess what your exposure to any of the affected projects would be?A: We have exposure to the power sector which is a shade less than 7 percent and we have an exposure to iron and steel which is a little about 5.25 percent. So these would be the two major affected sectors. I do agree with your poll that it is too early to say for a very simple reason that the country needs power very badly. I am sure going forward that some solution will emerge, infact it has to emerge. So if the Supreme Court (SC) has thought that a particular method is not okay then probably a method which is okay would have to be thought about.As far as BoB is concerned we are still working through. I don\\'t think the effect would be so profound at the moment, we have a lot of projects for instance we have lent to the power sector which is based on bagasse, sugar mills have byproduct which is bagasse. Similarly we have lent to the power sector, we have lent to a number of steel mills. Having said that I think it is too early and we should keep an eye on September 1 and see what transpires at that time.

Reema: Can you give us some color on the projects to which you all have exposure which directly take their coal from these coal mines which are now deemed illegal. For those particular projects can you give us some color?A: We don't have the figures as yet but I don't think we should go in kneejerk reaction and assume that from today onwards the coal will stop flowing. I think some media has to be formed in the long-run and perhaps in the short run also and perhaps some answers may be forthcoming in the short run. Our bank is not going into any knee-jerk reaction regarding this. Ekta: But there is a likelihood that whatever it might be, the SC verdict finally that may be it could be deallocation, may be it could just be a penalty, may be it could be something which we are not even considering as a probability at this point in time. But is it fair to assume that based on what you are assuming at this point in time, there will be gross NPLs which will rise in the system and may be Bank of Baroda too might see the gross NPLs as well as asset quality worsen within the power space?A: It is too early to say for the simple reason that the government seems to be keen on the power sector and the country needs power. So I simply cannot visualize a stage where it would result in a status quo and no way out will be found. I simply cannot see a situation where there would be indefinite impasse, I am sure this will be resolved.

Ekta: For what you have seen in FY15 already do you think we are in a better place in terms of asset quality or worse than what we saw in FY14 simply because of these uncertain events that have come up for example we have stress which is emerging in the UP sugar space as well, we have the latest that we heard on Tata Power as well as Adani Power from the SC ruling yesterday. So additionally do you think that overall whether we are better placed on asset quality this year than last year?A: The factual position is that if you look at the banks results for Q1, clearly the asset there has been a marginal improvement in asset quality. As far as BoB is concerned in the last quarter of last year we saw an uptick in the asset quality. Our NPAs to our total assets actually declined and went below 3 percent. In Q1 itself the accretion to our net assets was not very high. Of course in Q1 there is some decline in the amount of lending. So as a matter of percentage there may have been a little decline but we did not see that much of deterioration in assets and our feeling was perhaps that we have hit bottom. Ekta: You did slippages of Rs 1881 crore in the previous quarter and your fresh restructuring was Rs 986 crore. Can you tell us what Q2 is looking like, what could the trajectory be on those two numbers specifically?A: I think we should not see any marked deterioration. We don't give exact numbers but we are not seeing any marked deterioration. Ekta: Are you confident to see advances growth as much as you saw in the previous quarter?A: We are seeing advances growth, they are taking place. There has undoubtedly been over the last two-three years a slowdown in advances. But these are tied to the general economic recovery. If we say that GDP would increase in this particular year, we should see a slow improvement in advances. Having said that we are not seeing any dramatic increase in the number of proposals that we are getting especially in the mid or large corporate space.