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Last Updated : Nov 02, 2015 06:04 PM IST | Source: CNBC-TV18

NPLs to improve by year-end; focus on retail: Indian Bank

The bank will focus on the retail segment and expects 11-12 percent loan growth in FY16, Mahesh Kumar Jain, MD & CEO of Indian Bank said.

Gross non-performing loans reduced due to higher recoveries in the second quarter of FY16, Mahesh Kumar Jain, Managing Director (MD) & Chief Executive Officer (CEO), Indian Bank told CNBC-TV18.

The bank’s profit after tax (PAT) grew 17.5 percent to Rs 369.3 crore. Gross non-performing assets declined to 4.61 percent and net NPA decreased to 2.6 percent in the quarter gone by.

The bank’s total slippages for Q2 were Rs 547 crore. One nominal account was refinanced under the Reserve Bank’s 5/25 scheme and another was sold to asset restructuring company (ARC), Jain said. He expects the NPL situation to improve further by the year-end.

The bank’s focus is on growth in the retail sector and not much in the corporate segment, Jain said adding that he expects 11-12 percent loan growth in FY16.

Below is the transcript of Mahesh Kumar’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Sonia: The internals of the asset quality – can you give us a little more details on that this quarter? What were the slippages that the bank saw in this quarter gone by?

A: Fresh slippages during this quarter was Rs 547 crore whereas the recovery and upgradation was Rs 589 crore resulting in net decrease of gross non-performing assets (NPA) during this quarter from the previous quarter to the extent of Rs 42 crore.

If we see sequentially as well as consistently over the period, there was substantial control on the fresh slippages as we told in the past and last year September, 2014 the fresh slippages were Rs 786 crore and September, 2013 it was Rs 770 crore. This quarter it is Rs 547 crore.

Latha: That is an improvement certainly, but was any of this because of sale of loans to asset reconstruction companies (ARC)? Did you sell any loans this quarter?

A: There was only one asset, which was sold to ARC and that was only on cash basis and that was a very nominal amount and entire cash we have recovered.

Latha: The other problem of course is whether you refinanced any loan through the 5:25 route, did you? If you did, what was the amount and should we see some pipeline of such refinancing?

A: Total 5:25 is Rs 1,400 crore and during this quarter, it is Rs 600 crore. In the previous quarter, it was Rs 800 crore. In the pipeline, we do not have much as far as 56:25 is concerned.

Sonia: Can you tell us what is the run-rate of the slippages that you are expecting in coming quarters?

A: Last time also, we confirmed and now also we are telling that as far as flow of NPA is concerned, with regard to slippages, that is very well under control and we do not expect that it will go out of proportion. And as far as stock of NPA is concerned, with regard to recovery, we have put lot of measures and there is consistent improvement in the recovery as well.

Sonia: What exactly are the recoveries that you are seeing in this quarter?

A: This quarter, we are targeting around Rs 400 crore of recovery. That is cash recovery.

Latha: What kind of a gross bad loans can you project for the year end?

A: We are targeting better gross non-performing loans (NPL) percentage picture as on March 31, 2016.

Latha: What is that target for end of year NPL?

A: Difficult to give the guidance, but definitely, it will improve upon from the present number and the previous quarter as well.

Sonia: So, if you are talking about stressed sectors, which are the sectors that are looking stressed now and what kind of slippages would you expect?

A: 5:25, it was only coming from two sectors. One is power and the second is steel. So, still we are feeling that steel sector there is a little bit stress on the steel sector and fortunately, we are not having much exposure in the steel. My total steel sector book itself is around 3 percent of the total book size.

Wherever restructuring was required, almost we have completed that restructuring process, we are not feeling much pain, except there maybe few here and there in the times to come – some stress may come. Otherwise we are not feeling any stress.

Q: I think I saw a net interest margin (NIM) of 2.26 percent that you have reported versus 2.49. That is a reduction. How would margins pan out in the second half?

A: Guidance basically, being we reduced the base rate by 30 basis points on June 8, 2015. So, because of that, NIM has come down. And second, we have given another base rate cut from October 7, 2015. So, whatever deposit rate also we have reduced, so I feel we may be in the same range.

Sonia: What is the credit growth this quarter and what is your expectation for the year?

A: Credit growth this quarter was five percent, year-on-year (Y-o-Y). Actually that is a conscious decision and consistently for a couple of quarters we are putting on the same strategy that we are not growing as far as corporate sector is concerned in a big way.

We are focusing on the retail side and our retail side and our retail book proportionately increasing over a period of time. Last year to this year also and in the previous year as well. The guidance for this year is around 11-12 percent growth.

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First Published on Nov 2, 2015 03:37 pm
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