Some agri, steel loans at risk, no power NPAs: Karnataka Bk

The bank has recovered Rs 175 crore this quarter against Rs 102 crore during the same period last year This upgradation is in the form of cash recovery and by selling an asset to the asset reconstruction company (ARC) for Rs 50 crore, he says.

Below is the edited transcript of P Jayarama Bhat’s interview with CNBC-TV18's Ekta Batra and Sonia Shenoy.

Ekta: Can you take us through what happened with your asset quality this time and what lead to the worsening?

A: Asset quality if you take year on year (YoY) the asset quality has improved from 3.43 gross to 3.26 and 2.37 to 2.05 there is an improvement on asset quality YoY but on consequential basis it has just gone up from 2.95 to 3.26 and quantum wise it has just gone up from 944 to 1,033 and there were some agriculture loans which have become Non Performing Asset (NPA) and this has added to the NPA portfolio.

Sonia: So, do you expect this asset quality situation to worsen further from this 3.26 percent level?

A: No, it will not worsen. This is temporary aberration as far as the agriculture loans are concerned. So, we are in the recovery spree and definitely going forward with the income and all that the NPAs will be recovered. This would be once again below three percent or 2.75 percent going forward.

Ekta: Can you tell us exactly what the slippages were this quarter compared to the last quarter. How much came in from agri, how much slipped from your restructured book?

A: As far as the slippages are concerned as against the slippages of Rs 266 crore last year's first quarter this is almost same Rs 264 crore but recovery was robust. It was as against Rs 102 crore of recovery. We had a recovery of Rs 175 crore in this quarter and from the agriculture portfolio we had a slippage of Rs 60 crore and from the restructured portfolio there are no slippages. It was almost about Rs 20-25 crore.

Ekta: Agri was how much?

A: Around Rs 60 crore.

Ekta: And how much do you expect going forward from agri?

A: No, that is all. Usually the days for agri it is of May 31. So, we take it as a cut off date and it will be an yearly payment. So, going forward the agri NPAs will come down.

Sonia: Can you tell us a little bit about your margins as well? What were the net interest margins (NIM) this quarter and how much is it compared to say the previous quarter?

A: NIM has quite considerably improved. It has improved sequentially from 2.28 to 2.55 and YoY it has improved from 2.33 to 2.55. In fact there was a good growth in net interest income (NII). It has gone up from Rs 278 crore to Rs 331 crore a growth of 19.08 percent and a healthy growth.

Ekta: Just wanted to confirm one thing. You said you recovered Rs 175 crore this quarter itself and that compared to around Rs 102 crore that you did in Q1 of FY15?

A: Yes, recovery means it is upgradation, cash recovery and one asset sold to the asset reconstruction company (ARC).

Ekta: How much did you sell to ARC?

A: ARC we sold about an NPA account of Rs 50 crore.

Ekta: There is a lot of concern which is now being brought up with regards to steel sector as well as the power sector in terms of SEBs. Can you tell us how much pressure are you seeing from these two sectors in specific within your gross Non Performing Loans (NPL)?

A: There are no NPAs in the power sector. All are performing, there are some restructured accounts but as far as the repayments are concerned as of now we are getting correct repayments, there are no NPAs in the power sector.

Ekta: And steel?

A: Steel sector yes, we had some impact. In this quarter we had an NPA of around Rs 28-30 crore in the steel sector and going forward we may not have much impact on this.