Expect to maintain margins at around 3% in FY12: Dena Bank

Maintaining a net interest margin of 3.22% in the second quarter, DL Rawal, the chairman and managing director of Dena Bank said the bank is likely to sustain the NIMs at 3% for FY12.

In an interview to CNBC-TV18, he said, "There is a dip in the credit growth but we see no difficulty in maintaining 18-20% of the growth, going forward."
 
Further, he added that the bank expects good recoveries in the next two quarters. Below is an edited transcript of DL Rawal's interview to CNBC-TV18. Also watch the accompanying video. Q: Could you tell us what your net interest margins were in this quarter? A: We have been able to maintain a net interest margin of 3.22%, which is higher than 2.90% as of June. So, there is an improvement in our net interest margin in September. Q: Do you think you could maintain these margins at this level itself or do you see some pressure in the margins getting into the fiscal? A: We would be able to maintain our net interest margin at about 3% during the whole year. So in the third quarter we should be able to maintain it. We have been able to contain our non-performing assets and at the same time we are able to maintain our quality of assets also. There is a dip in the credit growth but at the same time if you see our growth it is all diversified credit growth. So, on a year-on-year basis we have maintained 18-20% growth, which we hope we will be able to maintain by end of March also. However, it will be totally diversified and hence, I don't see any difficulty in maintaining our margins. Q: Your gross NPA has gone up from 1.86% to about 1.93% odd. Is there some amount of pressure that you are sensing and how do you expect it to move going forward? A: If you look at our gross figure it was Rs 825 crore as of June and it is now Rs 830 crore, last year September it was Rs 825 crore and now Rs 830 crore. As of March, it was Rs 842 crore. If you compare with our March figure we have improved from Rs 842 crore we have gone down to Rs 830 crore. As compared to last September our share of gross NPA was 2.26% which has come down to 1.93%. So compared to June, there is a slight increase but there is no cause of alarm also. As declared in the beginning of the year, going forward, we should be in a position to contain our NPA level at around the March levels. Q: Have you migrated completely to system based NPA recognition? A: Yes, because for small accounts there is an increase of Rs 80-88 crore, only on account of their system generation NPA. But for the next two quarters we expect good recovery in those accounts too. At the same time, we are doing lot of recovery camps in the field to address the concerns of the small accounts. The second particular indication of retail account, when it comes to housing loan we have gone for restructuring of those accounts and tenure has been increased. Further, the quality of assets is also particular when we are going for lending as well. That is the reason all our recovery officers are in the field today. We are monitoring all accounts, each and every account of Rs 25 lakh and above at the handlers level only. If there is any concern, any problem we come and contact with our borrowers also, we discuss with them, try to resolve their issues also. And probably that is a secret of how we are able to contain our NPAs and I am quite confident that end of March we will be able to sustain this change. Q: Do you have any high exposure to the infrastructure and power sector because we are seeing high amount of slippages coming in from there as well? A: Yes, we have a good exposure in the power sector and we do not find any concern on account. However, going forward in case there is any request they would be asking for rollover and maybe they will be asking for some restructuring. There is an apprehension in the market. We will have to discuss with other bankers and work out plan according to the cash pledged as well, if at all that request comes in. Q: What kind of credit growth do you think Dena Bank can see in FY12, given the kind of concerns of higher interest rates that we are seeing? A: In the first half, the credit growth was down for the industry as a whole. In the second quarter because of the requirement for agricultural industry, like sugar, rice sellers, anything related to agriculture, since they have their requirement in the second half and the government too is trying to address the bottlenecks in the infrastructure sector, these are bringing some off take on the infrastructure side. So our growth was 18% as on September year on year basis and I think we should be able to maintain 18-20% growth by end of FY12.