Planning to go to market for Rs 3,000 crore of QIP: BoI

Reserve Bank of India (RBI) holds fire as expected and leaves key rates unchanged. The big takeaway from banks is Governor Patel announces faster recapitalisation of public sector undertaking (PSU) banks, says the move will reform state-run banks.

In an interview with CNBC-TV18, Dinabandhu Mohapatra, MD & CEO, Bank of India (BoI) discussed about the same.

Government has made it very clear that recapitalisation will be mixed with reform and it will depend on the performance and potential of the bank. As far as performance is concerned, BoI in particular is doing extremely well for the last two quarters in non-performing assets (NPA) management and in profitability, he said.

Some of the big accounts under National Company Law Tribunal (NCLT) are provided at 100 percent, he added.

According to him, in next two quarters banking industry will see a lot of upswing.

We are planning to go to market for Rs 3000 crore of qualified institutional placement (QIP), said Mohapatra.

The bank has reduced its corporate exposure from 52 percent to 48 percent, he further mentioned.

Speaking on loan growth, he said that he expects loan growth to be at 6-7 percent over the next 2 quarters.

Below is the verbatim transcript of the interview.

Latha: The announcement from the governor was that first banks will have to go and raise their own capital and then, the performing ones will be rewarded by the government. What has been your qualified institutional placement (QIP) plans? How successful are they?

A: Government has made it very clear that recapitalisation will be mixed with reform and recap will depend on your performance and potential. As far as performance is concerned, Bank of India in particular, for the last two quarters, doing extremely well in non-performing asset (NPA) management, in profitability, all key areas we are doing well. And potential wise, Bank of India having the pan-India presence and internationally present in 22 countries, we are poised for wholesale banking with international presence. So both way, we will be benefitted.

And one of the key advantages Bank of India is having today, the 65 percent of NPA is already covered by provisions. So that gives a good leverage to Bank of India. And some of the National Company Law Tribunal (NCLT) accounts where there is a likelihood of resolutions and in those accounts, some of the big accounts, we have already covered 100 percent. If resolution happens in the month of January, February, Bank of India will get back, write backs of a huge amount of provisions. That will benefit Bank of India.

As far as banking industry is concerned, definitely, RBI made it very clear that this capital will be frontloaded and that will help the entire banking industry. And if you see, growth is also starting to raise its head, so all banks are showing better results. Going forward, next two quarters, banking industry will see a lot of upswing.

Sonia: So do you expect to see a better performance as far as asset quality is concerned? From this 12 percent mark of gross NPAs, can we see you do less than that next quarter?

A: Naturally, it is moving in that direction. But, if you take into account some of the developments in some of the banks, based on the recent initiatives of NCLT and the response to NCLT, there may be some review of some of the old assets, those who are really standard as in today, but taking the benefit of NCLT and other things, regulators and other agencies, other banks may take a fresh look. But that will be in the right direction and that will definitely give a good comfort level to the market and banks can take a call and take a view on capitalisation as well. So that will be a positive for all banks.

Latha: What is the capital you need?

A: Actually, as on today, calculation is going on. Before recapitalisation, we requested the government for Rs 2,500 crore from them and rest we had planned to raise from the market. But after recap announcement, we have started calculating again and we are discussing with the government. That will be decided. On our own, we are planning to go to the market for Rs 3,000 crore QIP. Board has already approved, so we are planning to raise that from the market as well.

Latha: You saw a decent growth in advances in the last quarter. How are you likely to end the year in terms of advances growth?

A: I always mention this in all forums. The topline growth per se, may not be good indicator. Within that topline, if rebalancing of asset and no capital light asset you are building up, that will give good profit and good revenue. If you see, even if Bank of India has not grown, the topline more or less same level, but our retail has grown around 16 percent, SME around 5-6 percent, agriculture around 5-6 percent. So growth is happening and we have reduced our corporate exposure from 52 percent to 48 percent. So rebalancing of entire asset and capital light asset build up we have started. going forward, since generally on-season starts from October and we see a little bit demand from the market, so next two quarters, there will be some growth though it will be less than double digit growth, but there will be some growth in next two quarters.

Latha: But you did only 0.3 percent in the previous quarter. So you still think you can get to high single digits?

A: If you see, even 0.3 percent growth in topline, but profit is improving and everything is also improving, interest income is also improving because of the rebalancing of the entire portfolio. That we have started from very beginning. That has helped us to post better result. And going forward, it will be around 6-7 percent plus growth for the next two quarters.

Latha: The NCLT exposure first list is Rs 8,000 crore and the second list is Rs 6,600 crore. Have you provided for all of them, 50 percent?

A: First list is Rs 8,300 crore, but second list only Rs 3,300 crore.

Latha: And provided fully?

A: Bank as a whole, we have provided 65 percent of the entire NPA portfolio. First list, we are definitely more than 55 percent. But some of the big accounts, those who are on the verge of resolution, there we have provided 100 percent. So those cases we will be writing back the provisions. That is one of the biggest advantages for Bank of India. And second list also, we have provided more than 50-55 percent depending upon the resolutions on the first list, we will definitely get some traction in the second list.

Latha: Aircel and Reliance Communications are exposures for you and are they provided for?

A: No, Aircel we do not have exposure to. In that respect we are lucky. But the other account, we have some exposure, but things are going on. We are confident that it will be resolved as per the expectations.