Indian Bank expects NIMs at 3.2% this year: CMD

TM Bhasin, chairman & managing director, Indian Bank, says that there were slippages in textile, agriculture, SME, MSME sector and education loans which lead to a sharp fall in asset quality.

"We expect NIMs to stabalise around 3.43% as we have reduced the base rate by 25 bps but at the same time the carry on effect of rate of interest on deposits will be there for 12-18 months period, we expect the NIM to be around 3.2% in the current year," said Bhasin. Below is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video. Q: What is the reason for a sharp fall in asset quality in this quarter? A: Some projects and COD were delayed. In some cases, first restructuring was done and accounts have turned NPA with second restructuring. There were slippages in textile, agriculture, SME, MSME sector and education loans. These are soft NPs which can be recovered soon. The bank has made plan to make account wise recoveries in Q1 & Q2 to bring down gross NPAs and have healthier portfolio. Q: What is the total amount of restructuring that the bank has undertaken? A: Till date, we have restructured Rs 8,000 crore in our book of which 6% is NPA and all others are performing well. This year, we have undertaken a restructuring of Rs 3600- crore advances in aviation, power sector and real estate accounts. Q: What are the exact slippages in Q4 and how much recovery are you expecting in Q1 and Q2? A: We have slippage to the tune of Rs 1010 crore which includes our exposure to Rs 110 crore in glass industries, Rs 200 crore in textiles, Rs 100 crore in real estate, education Rs 60 crore and in MSME, SME and agriculture sector Rs 200 crore. Some technical issues need to be sorted out in some accounts which shows under recoveries in textile sector as a result of which some accounts have been marked as NPA. We will try to plug these glitches and upgrade these accounts by September 2012. Q: Can you explain the extra provisioning that you have undertaken? A: Provisioning of Rs 170 crore has been made on account of restructuring and NPV in first year. The balance provisioning is made for NPA accounts. We have made an addition provision of Rs 190 crore. Rs 50 crore for education loan portfolio and rest for account specific portfolio. We have tried to take more care of provisioning to take care of future slippage, if any. We tried to make our balance sheet stronger. Q: Where do you see the net interest margins in FY13? A: The NIM is about 3.43% for the year which is quiet healthy. We expect NIMs to stabalise around 3.43% as we have reduced the base rate by 25 bps but at the same time the carry on effect of rate of interest on deposits will be there for 12-18 months period, so we expect the NIM to be around 3.2% in the current year.