See slippages below Rs 4.8K cr in Q4; no more loan rate cut: PNB

The fresh slippages reduced for Punjab National Bank in the third quarter to Rs 4,800 crore compared to the Rs 5,089 crore quarter-on-quarter, the bank reported in its Q3 earnings. In Q4, the slippages are expected to decline further, says the Usha Ananthasubramanian, Managing Director and CEO Of the bank. The recovery for Q3 was set at Rs 2,413 crore and upgradation was at Rs 1,534 crore. The recoveries have been more in line with the earlier provided guidance, says Ananthasubramanian.She adds that the bank may allot another Rs 5,000 crore for recoveries and upgradations for Q4. The recovery guidance for the year given by the bank earlier, was Rs 20,000 crore.The non-performing asset situation for PNB would have been much better had it not been for demonetisation, she says.The bank states that the reduction in slippages in NPA has translated to higher operating profits for the company. Its operating profits for the third quarter rose to Rs 3,155 crore as against Rs 2,918 crore during the same period last year.Hinting at the fact that another lending rate cut may not come very soon, Ananthasubramanian said that all banks have brought huge cuts to the MCLR (marginal costs of funds based lending rates) after demonetisation already and these cover all the benefits the RBI passed onto the banks.Other bankers who recently spoke to CNBC-TV18 recently, have said they will also not alter lending rates even if the RBI cuts rates when it meets tomorrow.The net interest margin can move towards 2.9 percent in the fourth quarter of current fiscal, says Ananthasubramanian.The bank said that it saw a 'handsome recovery' in the third quarter. Demonetisation was a tough period for the bank, but the staff rose to the challenge.PNB made a collection of Rs 95,000 crore due to demonetisation. It passed one the gain from the surge in deposits by way of reducing lending rates to make lending conducive for customers.Below is the transcript of Usha Ananthasubramanian’s interview to Latha Venkatesh on CNBC-TV18. Q: It is a pretty pair of numbers, you will have to say, especially this manner in which the slippages have come down. Can you just tell us more details about your asset quality? What is the status of the restructured assets? Is most of the restructured assets or your watch list largely recognised now? A: Firstly, I would talk on the recovery. We have been more or less in line with the guidance given of Rs 15,000 crore for three quarters and Rs 20,000 crore for the year as a whole. So, that has been one redeeming feature for the bank that we have been more or less coming up to that. And yes, we have recognised more or less, some of the large accounts on a voluntary basis as well and, as I said, what we need to very closely work on is the medium and the small accounts which the grass roots are taking care of, reaching out to the borrowers and then, that is how Q4 will pan out for us. Q: Rs 4,800 crore is fresh slippages I assume, compared to Rs 5,089 crore in the previous quarter. Now, how much do you see it evolving in the fourth quarter itself? Could there be a bit of an increase because of demonetisation? Some micro, small and medium enterprises (MSME) or SMEs are under stress? A: By the time the holiday or whatever that was given for 60 days will all be over. So, that is where the work has started at the grassroot level, going out to people, talking to them because the shock should not come from the smaller accounts because that has to be managed at the branch level where the work is happening very seriously. You can say up to January 31, we have done a recovery of about Rs 1,300-1,375 crore. So, work is in progress even in demonetisation times because we could not have put in another whatever Rs 3,974 crore of recovery, but for the recovery teams very close on the ground level. I am not able to quantify at this point in time whether it will be Rs 4,800 plus or below. It will be, we will have to work on it. Intent is to go below Rs 4,800 and obviously below March, which we have done now to maintain that. Q: Clearly, because of demonetisation, credit growth has fallen back, it is 1 percent lower than in the previous quarter. Have you seen any improvement in the fourth quarter? We are 40 days into the fourth quarter. A: Certainly the growth did not happen. We all know why it did not happen. So, if you see our gross non-performing asset (NPA) number, it could have been much decent had the, in the normal times, the credit pick-up, whatever that would have happened would have helped us to present a better gross NPA. But quantum wise, we are able to show a dip and this is a seven basis point increase. Q: I take your point. Therefore, I am asking you if you will have higher advances. A: In the 40 days we have seen improvement certainly. What was not happening in November and December, certainly we have been adding loans. There has been some loans happening, certainly they have been happening and in the retail also, the pick up what was x, today it is 2x-3x. So, that kind of monthly numbers. The aggression always happens in the last quarter and especially the last two months. So, I am hopeful. It may not be a very great growth of double digit and those kind of things which we were ambitious and kind of envisaging, but it could be somewhere around a decent percentage give the times, maybe 6-7 percent, that can be the order. Q: What is your sense about the amount of deposits that may remain? Your deposits have grown by 4 percent quarter-on-quarter, around Rs 27,000 crore. How much do you think will remain? A: The demonetisation money which has come in, we got about Rs 53,000 crore in current and savings account (CASA), loans accounts and several other accounts. But, I feel 40 percent of it should certainly stick on. Even if the caps are released and it is freed, even today, as I was telling, the opportunity is for you to spend your money through cheques. You can always do that. So it is happening as well. But the retention part, I expect it to be around 40 percent. Q: What is your sense about margins therefore? You will be able to go back? You lost about six basis points because you had a lot of un-deployed deposits. Will you be able to go towards the 2.9 percent mark in terms of margins? A: We should be able to do and we need to bring about a correction in the deposit rates as well. I would say a small correction we could look for in the savings or in the term-tenures wherever we see a surge and where we do not need that kind of a deposit. We should be taking a call on that which would also help us because a lot of surge happens in the last quarter in terms of deposits as well. So, we can conserve through that side. Q: You are the second banker in 24 hours talking about savings rate cut. Yesterday PS Jayakumar was talking about a savings rate cut. Is it coming, you think? A: We have to explore. It is a deregulated world, so 4 percent we are all stuck on. We can look at. People are going for graded interest payments, up to this deposit, some percentage and beyond that, so that is a graded payment of interest. Maybe there are several options to think of. On a Rs 2,20,000 crore of savings deposits, half percent could make a great difference. What I am telling is one way of looking at it when the savings have surged. And again, if you want, these are all calls through the asset-liability committee (ALCO). Q: Any big loan resolution on the anvil? You will have small pieces of loans through the entire range of big borrowers in steel. Are you anywhere close to a resolution in Essar Steel, for instance? That Farallon debt to equity was very much on the cards, should we see a resolution soon in this quarter, Essar, Bhushan Steel, Electrosteel Steels? A: The intent of the bankers is to work on a resolution and we have been meeting as a group and working on the various possibilities. Actually, being what it is, you know the investors who come in and back out, those kind of things being a phenomenon. So, we are exploring as many possibilities as possible which will be somewhat positive to bankers as well. It cannot be one sided, so bankers also have something to gain through that or something to repaid on that. So, that is how it is being looked at, but there are several options being. There is not one option that we are stuck on. Q: Even Jaypee shares have been rising and I am sure all of you have exposure even to that group. Should we expect by March 31, any of these NPA resolutions to happen? A: We are all looking forward to have something because that also helps us to have some positive vibes. So, we are also trying to look at what best can be done, but in entails several parties. There are several players in this, it is not the banker and the loan customer or loan because we have too many people involved like stakeholders coming into it. So, how it finally pans out is the crux of the whole thing for which we are all looking forward to. Q: Any guidance for, if not slippages, recoveries and upgrades for the fourth quarter? A: My thing should be around, I am targeting another Rs 5,000 crore of recovery and upgrades because my commitment has been Rs 20,000 crore. Q: Tomorrow, there could be a rate cut. If there is, should we expect further deposit and lending rate cuts and lending rate cuts from bankers? A: The thing is if you see during this period, all of us have done without cutting the deposit rates. We have all gone ahead and done a huge cut in the Marginal Cost of funds based Lending Rate (MCLR) which is acceptable and if you compute the month-wise cuts that have happened, it would be more than what RBI would have passed on together during this period. Secondly, it is an MCLR regime that we are into. It need not be that today, immediately I have to cut, maybe we can take a call because it is a month-on-month review that is happening. So, the transmission can happen in shorter phases and it need not be today, tomorrow and the next month. It can happen, but we have to look at the cuts that we have done and also assess the income, expenses and profitability and so many things that will be woven around that.