Possible to see Q1 type income growth ahead: Lakshmi Vilas

In the April-June quarter, Lakshmi Vilas Bank reported a growth in NII and improvement in norn-performing assets. The bank's MD & CEO Rakesh Sharma spoke to CNBC-TV18 to discuss the quarterly performance and the road ahead.Below is the transcript of Rakesh Sharma's interview with Anuj Singhal and Ekta Batra on CNBC-TV18. Anuj: I am looking at your numbers and your net interest income (NII) has gone up quite significantly. Do you think this kind of NII growth is possible in future as well? A: Yes, it is possible because last year if you see, most of the time our CD ratio was hovering around 70-71 percent and we have improved a lot of our processes. Sanctioned process has been improved and the credit processes have been improved so as a result we have been able to form a very good systemic procedure and the advances are picking up now. So that is why in fact last year if you see our net interest income growth was only 8 percent so this year we have been able to record 25 percent and we will be able to sustain this now. So the way we have built up our team, our processes, it will be quite effective and we are quite hopeful that we will be able to maintain it. Ekta: Your gross non-performing assets (NPAs) have improved this quarter as well largely stable and that improvement started last quarter quite significantly, what led to this improvement and what is the guidance for gross NPAs, by the end of FY16 where will we see it? A: Our NPA as on March 31, 2014 was quite high, 4.19 percent. After that we had taken various efforts including improving the processes. So as a result in fact, there is no quick mortality case now. So we have been able to avoid quick mortality cases, we have been able to avoid slippages. Now this quarter in fact there has not been any sell to asset reconstruction company (ARC), no sell, no write-off but despite that we have been able to achieve this reduction. Although of course this quarter it is marginal, still there is great satisfaction that without any sell, without any write-off in this scenario we have been able to control the NPAs. Ekta: What were the slippages this quarter compared to the last quarter and any sort of fresh restructuring? A: In fact this quarter, the slippages were Rs 12 crore as against that recoveries was Rs 16 crore so that is why net reduction was there and now RBI has stopped this restructuring but whatever cases were done last year, those cases continue. Only one case was pending which has been restructured but if you see my restructured assets also, standard restructured book has come down by 10 bps plus NPA normally we take, so those ratios have come down by 13 bps so now in fact every quarter, we are quite sure that we will be able to improve this position also. Anuj: In terms of your gross NPAs, you reduced it this quarter, would you say that they should stabilise now around current levels or would you improve them further going forward? A: Some restructured assets are there -- two issues. One is micro that is general economy and our banking process and systems. So one is economy now -- mainly it will depend on monsoon prospects also and other things and reforms, which are taking place. With that there will be some improvement scenario which will also support us and last year whatever reduction we had done even despite this scenario, we have been able to reduce NPAs. When economy also supports and good reform takes place and our internal processes become stronger, with that my target for this year-end is 2.5 percent gross NPA and 1.5 percent net NPA and if you see my provision coverage ratio also in fact when I took over in December, it was 45 percent and slowly we are increasing it. Now the provision coverage ratio from 45 percent in six quarters, it has increased to 63 percent. So every quarter one good thing which I would like to mention here is that in each quarter after June 14, in all efficiency parameters, one consistency we have been able to ensure, in operating profit every quarter there is increase, net profit there is increase, NPAs there is reduction, there is gradual improvement in all efficiency parameters so that is a very good thing. Ekta: What is your credit growth and what is your credit book break up right now? A: This year because it is year-on-year (Y-o-Y) although if you see sequentially, there was not much growth because June quarter in any case will be sluggish only but this Y-o-Y growth in advances it was 23 percent and deposits 20 percent. That is how we have been able to maintain CD ratio also at a strong level. So 37 percent of the book comprises mid-corporates and large corporate and 63 percent is retail. Last year if you see growth mainly came from large corporate and mid-corporate. Of course we have been able to book some new good accounts but now we have started some good new good retail products like loan against properties and loan against securities. So with that our retail book we want to strengthen more. Ekta: JP Associates is in news today because of that downgrade which has come through by CARE Ratings, I wanted to ask you if you have any exposure and what the status of the loan might be right now? A: No we have some exposure on JP but it is a standard account and they have been giving our instalments regularly, it is a term loan so the status is standard.