Indian Overseas Bank gains Rs 190 crore post transition to revised asset classification norms, says MD & CEO

DTA commonly refers to the overpayment of tax by an entity. Such excess tax paid can be adjusted against future tax dues. Edited excerpts:

Why have your sales to ARCs not taken place in the June quarter?

In April, maybe in the third or fourth week, we came out with an open auction of 91 accounts in a pool, amounting to Rs 13,000 crore. It included NCLT, non-NCLT and sole banking accounts. We wanted to sell two lots. So we put an open auction and many ARCs exhibited their interest, they came for due diligence also. So most of the ARCs decided on individual accounts rather than going for a pool.

Since there were 91 accounts and the due diligence part is taking place, and each individual account these ARCs are going to, in fact they are negotiating with the recovery team of bank.

We wanted to do it in Q1 and because of this aspect it could not be completed in Q1. Only thing that the due diligence process has taken a little bit longer is because as a pool most of the ARCs were not very comfortable as NCLT accounts were also there. A part of this will happen in this quarter.

Can you tell us how this will happen in the second quarter?

Now it is more or less not as a pool, but as individual accounts. Many ARCs are interested in individual accounts and negotiation and discussion are going on.

These accounts are from which segments and at what stage are the discussions?

It consists of mostly corporate and MSME, and corporates have the major share.

Why you are going slow on education loans?

For education loans, the number we are talking about is misleading. Misleading in the sense that disbursement is happening, and fresh sanctions are happening. But at the same time, we are selling education loans as a pool also to ARCs, the older unsecured education loans. So the net impact of the sale and the sanctions, whatever we are doing, that is showing you a negative growth. But I repeat that education loans, sanctions, and fresh disbursements are happening as usual.

We are doing this ARC sale for the last 5 years consistently as a pool. So because of that outstanding, you can see that it is showing a negative growth.

The education loan problem is particularly specific to Tamil Nadu. All banks which have more branches in Tamil Nadu, most of them are grappling with this education loan problem.

What is your take on personal loans, why is it showing a sharp growth?

Our base is very low. As on date, my total personal loan outstanding is Rs 2,200 odd crore only, against gross advance of Rs 2,29,000 crore, and against retail outstanding of Rs 52,000 crore. If you look percentage-wise, personal loans constitutes around 0.98 percent, less than 1 percent of my total credit. It is hardly anything and whatever personal loan we are giving are only to those clients whose salary is coming to us.

Are you in talks with some Fintech or NBFCs for co-lending?

Yes, we have done co-lending. We have a portfolio of around Rs 600 crore already. We started two years back and pool buyout also is happening. Fintech means the technology partner only. So the software is there with us also. And lending is happening from our branches digitally.

Many proposals are there. People keep coming and it's a matter of pricing. So we look at the pricing and our liquidity position and accordingly we take it.

Why are PM Jan Dhan Yojana (PMJDY) zero-balance account numbers falling?

The number of accounts is not going down, but rather those accounts are getting funded now. We have increased the number of BCs (business correspondents) from 3,000 to 6,000, and each BC has been mandated with getting these zero-balance accounts converted into funded accounts.

And it's happening on a regular basis and getting monitored at central office level, and at GM and even ED level also. All these efforts have yielded results.

Why are your slippages coming down?

I will say that our efficiency has improved. People have realised the importance and the customers have also got educated about SMA (special mention accounts) 0, 1, 2, and the CIBIL getting impacted.

I think it is awareness at all levels that is helping us, and of course regular and close monitoring of accounts right at the SMA 0 level. At IOB we try that the accounts which are appearing in SMA 0 should not move to SMA 1. At SMA 0 it should be arrested and the accounts should be made regular.

Have you communicated to the Reserve Bank of India on draft project financing norms?

Through IBA (Indian Banks’ Association) only it has gone. Each individual bank has not written anything to the RBI. We had a meeting and all banks gave their suggestions to the IBA.

And the IBA on behalf of all banks has given some suggestions to the regulator.

Can we expect any provision writeback as your NPAs are coming down?

This quarter also we have recovered almost Rs 360 crore from technical return of accounts and this goes directly to the P&L.

It depends on recovery but we always target the maximum out of the technical return of accounts. The maximum we can recover should be recovered. So there is no limit as such, if I am able to recover Rs 1,500, Rs 2,000 or Rs 3,000 crore also I will be very happy to do that.

Is there a writeback in DTA?

Yes, Rs 100 crore we have done today in this quarter. We will be doing it next quarter also, it will be difficult to tell the exact figure at this moment.

But substantially we have a DTA of almost Rs 5,000 crore. One year before it used to be Rs 6,400 crore. So gradually we are reducing it. It will also happen in Q2, the exact amount will be difficult to tell.

Have you gained any amount after the transition to revised classification norms of investment?

We have also gained around Rs 190 crore. The transition has already happened and has stabilised also. And that amount has been transferred to the reserves as specified in the norms.