Do not see much problems in shipbuilding, construction: OBC

Reema: You had indicated that the fresh slippages stand at Rs 4,019 crore. Could you also give us some more details? Is your asset quality review (AQR) completed, what are the bad assets on the watchlist, could you quantify that?

A: The slippage this quarter has been almost the same as last quarter at Rs 4,019 crore and again the major contributor has been iron steel at Rs 2,312, shipbuilding Rs 373 crore and construction Rs 297 crore. Those are the three major components of late.

The AQR, we took almost everything last quarter. So the contribution of AQR is only one account of Rs 166 crore.

Mangalam: Can you also tell us that whether all the AQR provisions have been made on your books or can we see further pressure coming into your accounts in the next few quarters?

A: Whatever AQR was required up to March has been fully made. We took more than 80 percent last quarter itself. So there is no AQR pressure as such on our balance sheet going forward. Some of the weak asset provisions that are required to be made in phases will continue to be made but that is not a major pressure on the bank.

Reema: Clearly these sectors, iron and steel, ship building construction, has been a problem area for you, because even out of your Rs 4,019 crore, you are indicating that it is only on account of Rs 166 crore on account of AQR. So the rest Rs 3,850 crore is on account of these three problem areas. What is the visibility on that in the coming quarters, what should we expect the slippages to be?

A: On construction, we don’t expect much of the slippages. Going forward, the way government has moved at resolving issues on road sector, they are basically engineering, procurement, construction (EPC) contractors, which should improve the position going forward.

Even on shipbuilding and ports, lot of steps taken, lot of defence orders expected, so there also we do not expect any further problems.

On iron steel, it is probably a result of the accumulative problems over the last one and a half to two years. However, with the minimum import price (MIP) and other measures already being taken by the government, we hope that going forward, the pressure on steel should reduce.

The steel manufacturers must feel much better. Our knowledge is they are already feeling an improvement but coming to bank accounts, it may start sustaining it better, maybe one-two quarters down the line. So, we do not expect the type of slippages that have happened in last two quarters to continue going forward.

Mangalam: If one takes a look at your asset quality as well, your gross non-performing assets (NPA) and net NPA are standing at six-seven quarter highs at alleviated levels. Do you expect that to continue, could you give us some forward guidance on your asset quality in the next fiscal?

A: One of the reasons -- apart from higher slippages is that the credit growth has been very muted at around 3.78 percent. As we expect much better growth at least at around 10-12 percent in the year to come, the bottomline between the calculation of NPAs -- the total advances are expected to increase. Therefore the percentage should come down even with that.

Also the type of huge slippages we have seen in two quarters, Q3 and Q4 is expected to ease out a bit quite substantially in the days to come if the steps being taken by the government continue like this and the economy continues to show good signs.

So, we expect this percentage to be coming down in future rather than going up as has been happening during the year.

Reema: Can you tell us what is the outstanding restructured book as well as what is the SDR pipeline, how many strategic debt restructuring (SDR) accounts were there this quarter?

A: The restructuring book is now about Rs 12,000 crore, in fact, Rs 11,828 crore. Therefore the restructuring plus NPAs -- if you look at the total including the facilities beyond restructuring given to those parties, is now at around 17.27 percent of the total advances. So, it has come down a bit for various reasons. However, as far as SDR is concerned, this quarter we did only one account of about Rs 56 crore.

So, we do not expect very SDRs happening going forward in near future. However, we do expect some resolution in the accounts that SDR has been done in the past and once that picks up then only further accounts will be expected to come.

Mangalam: What is the quantum of your book coming out of moratorium in the next fiscal from the restructured book?

A: In the restructured book, the repayment has already started but the restructured advances where repayment has not yet commenced is around Rs 4,500 crore only and out of that some still have time for the repayment to commence. So those are already quite substantially accounted for.

Reema: Can you help us with your watchlist, that is one question. Secondly, even on the restructured book nearly Rs 12,000 crore, so that is a significant amount. What portion of that do you fear might slip in to bad assets in the coming quarters?

A: Though it seems to be a big amount then part of it is still -- though now at a reduced level -- the power distribution companies (DISCOMS) and then about Rs 1,500 crore and then the rest some of it the repayments have already commenced. So, the left out repayment is Rs 4,500 crore.

Yes, there will be definitely slippages from this but now we do not expect them to happen at the pace they were happening especially because in road sector, a lot of new things have happened.

Basically they are getting contracts backed by annuity and in steel also with qualified institutional placement (QIP) and all coming, those accounts have been showing some better signs for last one-two months. So we hope that the slippage from restructured books should also not be as severe as we have seen during this year.

Mangalam: At what level do you see your loan book growth in FY17 and also if you could give us some colour on the net interest margins (NIMs) in FY17?

A: The NIMs should be between 2.65 and 2.70 and we have been able to maintain that despite all the upheaval in the balance sheet. As far as loan book growth is concerned, we expect it and we plan to have it between 10 percent and 12 percent in the 2016-2017 financial year.