Declared 80% of AQR requirements as NPA in Q3: OBC

The Oriental Bank of Commerce (OBC) disappointed street with a loss of Rs 424.7 crore against profit of Rs 19.6 crore in year-ago period in the third quarter of FY16. Net interest income (NII) grew one percent to Rs 1309.3 crore in the quarter ended December 31.The bank’s gross non-performing assets (NPAs) rose to 7.75 percent as against 5.7 percent quarter on quarter and provisions went up to Rs Rs 1,183 crore in Q3. During the quarter, the bank has declared 80 percent of the NPAs that were required to be declared under the RBI’s asset quality review (AQR), says the MD & CEO of the bank, Animesh Chauhan. Speaking to CNBC-TV18, Chauhan says three accounts were put under RBI’s 5/25 rule and 9 accounts worth Rs 1,500 were added under strategic debt restricting (SDR).The fresh slippages for the quarter were Rs 3,980 crore, he adds. In this, steel accounted for Rs 2,200 crore of slippages and textile was another major contributor.

Chauhan expects a 10 percent credit growth in the current financial year. Below is the verbatim transcript of Animesh Chauhan's interview with Latha Venkatesh on CNBC-TV18.Q: We just need first a little bit of data on the numbers that you have already announced. The Reserve Bank of India (RBI) allows you two quarters to take the stressed asset hit, should we expect as much of slippages in next quarter i.e. Q4 as we saw in Q3?A: I will inform you on asset quality review (AQR) in our bank. Out of the total non-performing assets (NPA) that are required to be declared under AQR, we have already declared 80 percent in this quarter and out of the total provisioning on NPAs that was required in AQR, we have already done 85 percent in this quarter. So the number on AQR is expected to be much less in the next quarter.Q: What are the fresh slippages this quarter?A: The fresh slippages are about Rs 3,980 crore.Q: You will have some idea now that we are one and a half months into Q4, what is the expectation, can we expect another Rs 3,500 crore of slippages in Q4?A: We cannot predict on that because some of the measures have been declared on the steel sector, so I don’t know how that will impact in retaining the asset quality.Q: You said 80 percent of the assets identified by the Reserve Bank of India (RBI) have been recognized, how much of that in rupees crore?A: I will have to check up. It is less than Rs 1,000 crore.Q: Then we should only expect another Rs 250 crore from this quarter in Q4?A: Yes, on the AQR part.Q: Your slippages outside AQR, outside the assets identified by the RBI have been three times the number identified by the RBI itself because your fresh slippages are Rs 3,600. So can you give us an idea if things look even marginally better?A: The steel sector has accounted for about Rs 2,200 crore of slippage in this quarter and textile is another Rs 250 crore. So these are the two major contributors into this. It includes the AQR part but that is a big contributor.Q: Rs 2,250 crore you said steel because this Rs 4000-5000 more of steel price protection comes because of the minimum import price (MIP), would you suspect or are your steel borrowers telling you that they will be able to payback their loans in Q4. What is the sense you are getting in your steel borrowers?A: We have not yet discussed in detail with the steel borrowers but that is what was the demand, which was long outstanding. We hope that their capability to service the asset will improve and therefore the slippages going forward should get contend at least.Q: Can you repeat fresh slippages were Rs 3,000?A: Rs 3,980 crore.Q: Can you tell us how many of SDR and 5:25 cases you had?A: On 5:25, we did three accounts worth Rs 365 crore and on SDR we had nine accounts worth about Rs 15-27 crore during this quarter.Q: Anything in the pipeline?A: On SDR, yes, there will be few accounts between 500 and 1,000 because the decision is yet to be taken.Q: You have provided a little bit for SDR?A: On SDRs no, most of the SDR accounts are from restructured books so they are already provided as restructured.Q: You were telling us what in 5:25 is the pipeline?A: 5:25 we don’t have much in the pipeline.Q: The RBI identified some assets which you say you have largely taken into account in the current quarter itself in Q3. Has the RBI given any instruction for FY17? Can you give us a picture of how the NPL problem is going to be treated? Any further assets that they will want you to recognizer?A: It is not a question of further assets to be recognized in 2017. What they have said is that weak assets where things have not improved as per expectation, you should start providing gradually even if they are not NPAs. So gradual provisioning will be required.Q: At the moment, your gross non-performing loans (NPL) is 7.75 percent. It rose by 2 percentage points in one quarter, how much may it rise in Q4 and what do you think will be the ceiling?A: Ideally we will not like it to rise in Q1 but that is not the position. We may see some rise in Q4. I cannot predict at the moment because majority of the hit we took this time is steel and textile. So we will have to wait and see how the sector progresses though we are one month into it, we will have to see how it progresses. We cannot give a guess on that.Q: Would we say that you don’t get beyond 8.5 percent or 8 percent of your book?A: We cannot say that because steel accounts are larger ones.Q: What is your total exposure to steel?A: Our total exposure to steel is around Rs 10,000 crore and it is 7 percent of the book.Q: Wanted to ask you your capital position. Your table indicated you have 11.1 percent capital adequacy.A: There is no promise. What we have requested government to invest in our capital for future growth if you can see our tier I is already 8.17 so we have asked them to give us capital for the future growth and we expect them to subscribe something to us. Exact number I will not be able to give unless the final green signal comes from the government.Q: Give us an idea what you expect will be the credit growth in Q4?A: Our credit growth we expect to be 10 percent year-on-year (Y-o-Y). We are already at about 7.91 percent, we expect it to be 10 percent as on March.