On May 30, IDBI Bank posted a net profit of Rs 135 crore for Q4FY20 after 13 straight quarters of net losses. The bank had posted a net loss of Rs 4,918 crore in the corresponding period last year. Saddled with high NPAs, IDBI Bank was rescued by the Life Insurance Corporation of India (LIC) last year.
In January 2019, LIC completed acquisition of 51 per cent controlling stake in the lender. The state-owned life insurer infused Rs 21,624 crore into the bank.
The bank has now turned the corner and hopes to be out of Reserve Bank of India's Prompt Corrective Action (PCA) framework soon, said Suresh Khatanhar, Deputy Managing Director of IDBI Bank, in an exclusive interview with Moneycontrol.
Edited excerpts:
Q. IDBI Bank is back in the black after several quarters. When do you expect to come out of PCA?
A: We are keeping our fingers crossed. IDBI Bank has achieved all critical parameters to come out of the PCA. We have demonstrated a strong balance sheet this quarter. We had made a request to RBI to remove the bank from PCA just before the lockdown and in mean while we have declared Q4 results. It is our duty and responsibility to report to the regulator about improvement in numbers. We are very hopeful.
Q. There is general uncertainty in the industry about economic revival. What is your outlook?
A. We have relief measures (from RBI) available upto September. So till, September, there is no issue. After September, we have to see how things evolve. Already there are relaxations for small businesses to operate. Third quarter should show some good economic activity. Government has given Rs 90,000 crore to discoms also. So, this money should come to the system.
Q. What is the plan of action for IDBI Bank now?
A. We have positioned ourselves as a retail bank. Retail already comprises 56 percent of our books. We will continue to march ahead in that segment. Secondly, we are fine-tuning our strategies further for higher productivity and higher profitability. Every penny saved is a penny earned.
Q. What are the plans to raise capital? Will LIC put in more money?
A. We already have sufficient capital. but being a financial institution, we may need capital for growth. We are evaluating some options to raise capital this fiscal. These include from the government, LIC or may be through a QIP (qualified institutional placement). We will wait for a quarter to see how the scenario is panning out, including fresh delinquencies. We may be looking at raising growth capital in the range of Rs 5,000 crore.
Q. Are you worried about the legacy issues?
A. All our legacy issues are over. Large NPA bases are cleared. In retail, risks are diversified. The balance sheets now look really strong. We have a provision coverage ratio of 94 percent. We have used our PCA period really productively and effectively. We have gone through all pain points and are prepared to bounce back.
Q. Both government and RBI have announced measures to help borrowers during COVID-19. How is the implementation progressing?
A. These are very proactive and need-based measures from RBI and government. Liquidity is impacted and these measures shall help.
That has to be provided either through the postponement of debt payments or by providing additional amount. Banks are taking up these measures with the required importance. The only challenge for us was to reach out to the customers during lockdown. People don't often respond. Still we are making our attempts.
Q. Who are opting for moratorium?
A. Some borrowers want to preserve capital and hence want to opt for the moratorium while some have genuine cash flow issues. Both these categories have opted for moratorium. So far, we have 68 percent of the retail book under moratorium and 60 percent on the institutional side. We offered the scheme to everyone and gave an opt-out option for them.
Q. There were some concerns among NBFCs about moratorium scheme availability from banks
A. When RBI announced moratorium facility on March 27, they never stopped anybody from availing the facility. The RBI never said don't give moratorium to MFIs or NBFCs. RBI said banks are permitted to allow the scheme. Now, this is within the discretionary power of the bank. So, some banks did not offer this facility to NBFCs and MFIs.
Q. The government has announced loan scheme for MSMEs. How do you look at it?
A. We have already identified all the eligible borrowers and started approaching them. This scheme became necessary for the revival of the economy with respect to small companies. That's why the government has announced these loans with 100 percent guarantee. Some companies feel they have adequate liquidity and do not need further capital. Except those people for others, we are working out the details. The loan is "upto" 20 percent of the outstanding loan as on February 29.
Q. Have you issued any loans under this scheme so far?
A. Yes, we have already started giving loans under the scheme, although not very big amounts.
Q. What percentage of your MSME borrowers have started asking for this?
A. The scheme just started. We will have to wait and see how many clients approach us.
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