Asset quality is a problem but it is a resolvable problem, is the word coming in from BK Batra, deputy managing director of IDBI Bank. He says there is a lot of stress in sectors such as industrials, and when earnings gets impacted, debt servicing follows suit.
Below is the verbatim transcript of BK Batra’s interview with Manasvi Ghelani on CNBC-TV18.
Q: What is your outlook on asset quality?
A: Asset quality is a problem but it is a resolvable problem and we are attacking it with all seriousness. As we know, asset quality has been affected by the environment around us. There is a lot of stress in the industrial sectors and their earnings have been hit over the last couple of years. When earnings get impacted, debt servicing also gets impacted. So, we do recognise that and therefore all kinds of solutions have been attempted and are being attempted to resolve that problem.
We cannot wish away that NPAs would not be there, NPAs would be there, they will get added, but you need to recover from the stock of NPAs. You need to attempt upgradation of NPAs, you need to restructure where absolutely essential and you need to prevent further occurrence of NPAs. So, on all forefronts we are working full blast.
Q: By the end of this financial year, where do you see in fact these numbers of recoveries also which stood at Rs 285 crore this time and non-performing assets (NPAs) and gross NPAs like I said where do you see these numbers coming by the end of this financial year?
A: Recovery is Rs 425 crore this year. However, we are expecting the recovery momentum to pick up. Typically in the first quarter the recoveries are lower though I would say that corresponding quarter if we compare then our recoveries have been much better. Going forward, there will be a spurt in recoveries and as far as accretion to NPAs additionally is concerned it is very difficult to put a number. Though we have our internal number but our effort will be that the addition to the beginning of the year number is minimal.
Q: Slippages came in around Rs 1,400 crore. This is the first quarter and there seems also because of a lot of Reserve bank of India (RBI) guidelines you had to restructure couple of them, but going forward what is the slippages that you are expecting or what is the pipeline that you are expecting in the coming quarters?
A: You are asking the same question in a different way, but I would again say that NPAs may happen. We will resolve some of them; we will recover some of them.
Q: Would it be Rs 1,400 crore at this point in time, would it be in the same lines or will we see some sort of increment in that number?
A: Very difficult to put an exact number on additional NPAs, because there are several accounts which continue to be under stress. So, our effort is to resolve them. So, if a couple of them do not get resolved and according to RBI guidelines we have to put them in NPA category, we have to.
Q: A lot of accounts that have got refinanced under 5:25 – IDBI is a part of the consortium as well. Going forward will this pipeline remain as is, are you looking at accounts, are you looking doing due diligence of any accounts in specific to any sectors that have been hurting you?
A: 5:25 is a scheme which is applicable to projects and we need to see which are the projects or which are the companies where this can be used to either give them relief or realign the repayments in line with the expected cash inflows of those projects. However, I would say that this is a mechanism which otherwise is very good but one has to be cautious in choosing the cases and because a longer repayment period can be given only on the back of stable expected future cash flows. As you go longer into the future it becomes more uncertain and therefore one has to factor several risks including risk of refinancing, including risk of volatility in the expected cash flows.
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