MC Interview| Canara Bank to transfer 8 NPAs worth Rs 4,000 cr to NARCL by Q3: CEO K. Satyanarayan Raju

MD K Satyanarayana Raju

State-owned lender Canara Bank has identified eight non-performing asset (NPA) accounts worth Rs 4,000 crore that the lender plans to transfer to National Asset Reconstruction Company Limited (NARCL) by the third quarter of the current financial year, managing director and chief executive officer K. Satyanarayan Raju told Moneycontrol in an exclusive interview.

In the April-June quarter, the lender recovered Rs 88 crore from another account through sale to NARCL, as per investor presentation. In all, the lender recovered Rs 207 crore in the June quarter through sales to ARCs, resolution and liquidation, among others, the presentation added.

Raju said that some but not all the eight accounts identified could be transferred in the second quarter itself. “All these accounts are from various sectors, and we have hopes for better bids,” Raju said during the interview.

Edited excerpts:

What guidance will you give on your corporate loan book?

We would like to grow the corporate book at 10 percent, and we are taking a little more cushion for that because in this interest war, you can expect some prepayments. In the first quarter we got some Rs 11,000-12,000 crore prepayments. We did not succumb to pressure to reduce the interest rate. Instead, we have accepted that prepayments. So, we are keeping a cushion.

Even after receiving prepayments, we have grown 9.85 percent year-on-year. In the first quarter, we have Rs 30,000 crore sanctions already, but these are all some project implementations. More Rs 20,000 crore are in pipeline. It will not be disbursed immediately, but depending on the progress of the projects. I don't see any difficulty in growing at 10 percent.

Why are you reducing your exposure to the petroleum, coal products and nuclear fuel segments? 

We don't want to reduce it. During the COVID period, there were problems. Our public sector undertakings have taken some limits overseas to meet the requirements arising from the Russia-Ukraine war and all those things. Those are short-term loans that they keep on repaying, which is the reason it (Canara's lending to these sectors) has also fallen. Otherwise, there is no call that we have taken that we want to reduce exposure to petroleum or chemicals.

Which accounts are keeping SMA2 loans higher?

Our total SMA 2 book was Rs 6,856 crore. Of these, Rs 5,000 crore pertain to two accounts. If you remove these two accounts, we have SMA 2 of only Rs 1,850 crore.

Of these two accounts, one is Rs 3,000 crore guaranteed by a state government for an irrigation project, and which quite often appears in SMA 1 or 2, it keeps moving among these SMA grades. The second is a rental discount real estate project in Bengaluru, which is also continuously appearing in the last three years. It is appearing only in the SMA2 book.

(SMA 1 and 2 are special mention accounts where the repayment is overdue by 31-60 days (SMA 1) or 61-90 days.)

These two have more than 200 percent security, hence there is no question of them slipping to NPA territory. However, for better safety, we have already provided more than Rs 1,200 crore towards these two accounts. It is a provision in excess of what is prescribed.

How many accounts are you planning to transfer to NARCL in the rest of this fiscal?

The bank has already transferred 17 accounts and now we have identified eight more accounts, which is around Rs 4,000 crore. Negotiations are happening. All eight accounts may not get transferred in Q2, one or two accounts may happen in Q2 and the rest in Q3.

Do you have any plans to revisit the Can Fin Homes stake sale?

The valuation has increased to only Rs 800 crore. We see it at more than Rs 1,000 crore, so until it reaches that level, we will not think of revisiting the stake sale plan. I don't think that will happen in this financial year because we already have had to cut two of our subsidies for disinvestment from full stake sale to part-sale. Those two things are our priority for the time being.