Asset quality is under control and slippages are not likely to increase much from here, said Canara Bank Managing Director & CEO Rakesh Sharma, in an interview to CNBC-TV18 after the bank reported its first quarter earnings today.
Gross non-performing assets (GNPA) for the quarter increased about 31 basis points sequentially to 9.71 percent and net NPA increased 27 basis points to 6.69 percent in Q1. This looked relatively better than some of the other banks’ numbers.
Sharma said slippages during the quarter were Rs 3,878 crore, of which Rs 648 crore was mainly in existing accounts where certain non-fund based facilities were converted to fund-based ones.
On the 1 percent year-on-year decline in advances and 1.4 percent YoY decline in overall deposits of the bank, Sharma clarified the bank was focussing on retail book and accordingly, these was decline on corporate advances as well as bulk deposits.
Although he refrained from giving out any guidance on the gross NPA levels, he said the bank will work towards containing it below 8 percent by the year end.Below is the transcript of Rakesh Sharma’s interview to Latha Venkatesh and Reema Tendulkar on CNBC-TV18.Latha: I must say that at the asset quality level, it is a pleasing set of numbers because it has not gone up much. Can you tell us about the slippages?A: Actually the slippages during the quarter were Rs 3,878 crore and let me say one thing that out of the Rs 3,878 crore, Rs 648 crore was mainly in existing accounts where some non-fund based facilities were converted into fund based facilities. So, overall the increase if you see, there is increase of Rs 696 crore. Out of that Rs 648 crore has come from the existing accounts. So, that way, we have been able to control the quality and our effort has been to ensure that this upgradation and recoveries are more than the slippages.Reema: That is very good to know because your Q4 slippages were at Rs 14,600 crore. So, you brought it down to Rs 3,878 crore. If you could just help us with some more numbers, what were the slippages from asset quality review? What would be the total quantum of your SME2 accounts as well as on the upgradations and recoveries? If you could give us the numbers for this quarter?A: The slippages during the current quarter was Rs 3,878 crore. As I said, Rs 648 crore is in the existing accounts. So, overall the recovery and upgradations was Rs 1,838 crore. And of course some in fully return of accounts, the technical write-off we do, that is Rs 1,344 crore. So, that is why this net addition is Rs 696 crore. But apart from that, the overall total cash recovery if you see, there was Rs 918 crore, plus in Rs 235 crore recovery upgradation in those accounts where slipped and upgraded. So, total almost more than Rs 1,100 crore, there was recovery other than this accounts. And in written off accounts also, our recovery was good, Rs 147 crore recovery in written off accounts as against Rs 105 crore year-on-year (Y-o-Y). Latha: But, the important point is your advances have not grown and even your deposits declined. Now that is a little scary. Will this continue? Your deposits have declined Y-o-Y by 1.4 percent.A: Actually our focus now has been on retail deposits. If you see that mainly the bulk deposits have declined. If the total deposits, if you see the current and savings account ratio (CASA). CASA growth has been 16.95 has been the CASA growth. In current account the growth has been 16.52. Saving 17.03 percent growth Y-o-Y. So, our idea was that basically we want to improve our credit deposit (CD) ratio also. The earlier CD ratio was hovering around 67-68 percent. So, now we have touched 69 percent. So, mainly bulk deposits have gone down. CASA percentage if you see, it has increased from 24 percent to 29 percent. So, that is as a part of our strategy also. Latha: Advances, how do you think you may do for the year end? Now of course it has declined.A: The advances also, again I will say the same thing. In the total overall reduction is mainly in large advances, corporate advances. If you see, our housing loan growth, there has been 22.79 percent growth in housing loans. overall retail has grown by 33 percent. Of course, you would remember, Ujwal DISCOM Assurance Yojana (UDAY) scheme there was Rs 9,000 crore there was reduction because it has been converted into bonds. So, that has affected. Now, this year, our guidance will be to grow by 10-12 percent.Latha: I just wanted to know what is the impact on the net interest margin (NIM), what is your NIM for the quarter?A: NIM for the quarter is 2.15. Last Q4 quarter it was 2.19. So, it was more or less at the same level. But one reason is that those accounts which were classified as NPA in March as per part of AQR and per our own cleaning exercise those account now interest income is not coming. So, that is affecting NIM. But once we start doing this S4A and as per RBI SDR by Q2 or Q3 it will happen. So, we will start booking interest income. So, that will help us substantially in increasing the interest rate. So, that position looks quite good Q4 onwards.Latha: How much amount of money is locked in potential S4A and how much of loans amount is under SDR?A: Now S4A so far because the instructions came recently only. So, so far in principle we have given only five accounts which is Rs 2,367 crore only but slowly the JLF will happen. So, because in this S4A you have to do forensic audit and this TEV study. So, by Q2 end the numbers will be clear. But all big accounts mostly either it will go for SDR or S4A.Reema: What would be your guidance then on the gross NPAs? It was at 9.7 percent in this quarter. How do you see it in the coming quarter, any number?A: No, like my SMA-2 as of now is around Rs 9,800 crore. Last time also I had indicated that we don\\'t foresee much increase and slippages because whatever main slippages were to happen mostly we have identified. Now, next our target will be like we have to see, the smaller advances yes, the recovery and upgradation will be happening. The bigger advances we will be taking the course of either SDR or S4A which upgradation of course will happen after one year. But we will start booking interest income. But the slippages will not be there. So, the gross level more or less we will be able to maintain the same level and once denominator increases percent wise it will come down.Latha: Come down to how much? Can we expect it closer to five percent in the year end, seven percent by the year end?A: No, by year end we cannot expect around seven percent or five percent because as I said as per S4A and SDR once the accounts is being conducted satisfactorily for one year then we will be able to upgrade the account. So, that time it will happen, less than four percent or this thing. But now this year end we will be able to contain maybe around below eight percent. That will be reasonable number, it will not be proper for me to give very ambitious numbers at this stage.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
