In an interview with CNBC-TV18, Executive Director of Bank of Maharashtra R Athmaram says that NPAs in the steel sector are manageable. He expects the bank's NPA situation to improve in coming two quarters.
Bank of Maharashtra's Executive Director (ED), R Athmaram believes that revival of the economy will aid the recovery in non-performing assets (NPAs).
One company that is worrying the banking sector is Amtek Auto because of its huge debt. Athmaram says the bank’s exposure to the company is Rs 1,200 crore and that the specially appointed joint lending forum is working on resolving the company’s liquidity issues, he told CNBC-TV18.
NPAs in steel, another troubled sector, are still manageable, says Athmaram. The bank has a 5 percent consortium share in Bhushan Steel & Power.
Athmaram expects the bank’s current NPA situation to improve in the next two quarters. He says that the bank is trying to contain slippages and recover such accounts.
Below is the transcript of R Athmaram’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: We wanted to get an idea about your exposure to the Amtek Auto stock and the Amtek Group itself? Amtek Auto’s new name is Castex. What is your exposure and would you worry about its ability to repay because a joint lender forum is underway?
A: Our exposure to the group is about Rs 1,200 crore and the joint liability forum is working to resolve the issues. The company is currently passing through some liquidity issues. I am sure the kind of infrastructure they have build over the years, they should be able to come out of the liquidity problem very soon.
Latha: What is Bank of Maharashtra’s exposure to steel companies? With the renewed fall that we are seeing in Chinese economic data the expectation is that commodities will take a further nose dive and for the past some many months and weeks we have been seeing steel companies noise dive what would be your exposure to steel aluminum?
A: I don’t want to take names, but we do have exposure to some of these sensitive steel companies. However, it is not very huge also. It is very manageable and in all these bigger cases already joint lenders' forum (JLFs) are in position. Since huge exposures are there for all the banks put together, the banking community is also trying to work out solutions to help the companies.
Sonia: Getting back to the issue about Amtek at this point in time it is classified as a special mention account (SMA) - 2 account but is there any worry that it could perhaps because of the liquidity issues become an NPA?
A: We prefer an account to not to cross the SMA-2 laxman rekha. Generally any account which is contained as SMA level is fairly good enough. There are many accounts which do occasionally crop up in SMA - 2 but they never seriously cause any problem.
SMA - 2 is after all a more serious early warning system, it is an indicator. There are many accounts where they are continuously under SMA-2 but they have been repaying the debts to the bank.
Sonia: Amtek has been repaying the debt and there has been no problems at this point with the lender because the joint lender forum has been formed correct?
Latha: Any of the steel companies you have exposure to - Bhushan Steel or Monnet Ispat & Energy?
A: We have exposure to Bhushan Steel and Power. Both the accounts we have.
Latha: The 5:25 for both are through?
A: All are consortium, our share in the consortium in all these big accounts are hardly five percent.
Latha: Has the refinancing been completed for both these stocks? Should we expect that at least for now they will be paying back?
A: We will have to watch and see. Modalities have been worked out results will have to wait and see.
Latha: In Bhushan Steel you had to also agree to a higher capex money and working capital loan for the company?
A: Once we have to revive some additional commitments may have to be taken but we will go by the JLF discipline whatever is our share that much we will surely take in to the company.
Latha: JLF’s decision has been to increase exposure a little bit to complete the plant is it?
A: Exact figure I don’t remember at this stage.
Sonia: Overall on the asset quality things have gotten worst for Bank Of Maharashtra in the quarter gone by? You gross non-performing assets (NPAs) are now at almost 7.9 percent. Do you think thing could get worst in the quarter to come and what about the slippages would you expect to see higher amount of slippages compared to the Rs 1,400 crore that you saw in this quarter?
A: The worst is almost over. Going forward, September and December should be better. For some of the bad accounts, we have provided and now we are working on the recovery strategies.
The next two quarters won’t be a cakewalk, but our performance should be much better. If not September, then December and March should be much better. We are taking all steps to contain the further slippages. All out effort are being made for recovery as well as for containing slippages.
Latha: We now are seeing these Payment Bank licenses coming in would you expect that some of your savings bank accounts could get poached by the new licensee what is your total share of savings and current accounts?
A: Currently we have a healthy current account-saving account (CASA) share of about 36-37 percent. We have patronized both from the household sector as well as some of the government department. No doubt once the payment banks come they will take away part of the savings bank business not the current business. We will have to live with competition and quite often competition proves in the long run a better for the consumer as well as the service provider.
With all the initiatives the government is taking for popularising the financial inclusion may be more volumes will come through the banking channel once the payment banks come in to picture. Industry could gain on the volumes if not on this one.