Rs 7K-crore NPA sale to NARCL by Q4: IDBI Bank MD & CEO Rakesh Sharma

'We have identified accounts worth Rs 11,000 crore, of which Rs 4,000 crore is technically written off', said Sharma

IDBI Bank Managing Director and Chief Executive Officer Rakesh Sharma in conversation with Manojit Saha says the board has decided to maintain retail share in total loans above 60 per cent. He says profitability will improve since most non-performing assets (NPAs) have been provided for. Edited excerpts:

IDBI Bank is firmly on the path to profit. What is the next three-year growth strategy for the bank?

In terms of business, we aim to grow at 10-12 per cent for retail, micro, small, and medium enterprises, and large credit. Our focus will mainly be in mid-corporate where the quality of advances will be respectable. We would like to grow in all areas. Our retail-to-corporate credit ratio is 63:37 per cent, which we would like to maintain.

As far as profitability goes, you see an upward trend — both in net profit and operating profit — because most NPAs of the bank have been provided for.

While profitability and asset quality have improved, the stock of gross NPA is still high at close to 20 per cent. How do you plan to bring it down?

Three years ago, gross NPA was 31 per cent. By accelerating provisions and recoveries, we brought gross NPA down to below 20 per cent. Net NPA is at around 1.25 per cent. Since a major part of our NPAs are provided for, if we do technical write-offs, our gross NPA can be less than 2 per cent. But bearing in mind the tax implications, we are steering clear. 

We are also thinking about transferring some of the assets to the National Asset Reconstruction Company (NARCL). Without further delay, we expect it to happen in the third/fourth quarter.

We have identified accounts worth Rs 11,000 crore, of which Rs 4,000 crore is technically written off. The remainder Rs 7,000 crore will be transferred to NARCL, helping us reduce gross NPAs to below 15 per cent. That is our target for March 2023.

Slippages in the first quarter (Q1) of 2022-23 (FY23) were Rs 964 crore — lower than Q1 of 2021-22 (Rs 1,332 crore). Do you expect slippages to come down in the next few quarters?

Of the Rs 964-crore slippage in Q1FY23, corporate slippage was Rs 443 crore and retail Rs 521 crore. Retail slippages came down proportionately, as opposed to the previous year. In the coming quarters, we expect slippages to come down further. While the slippage ratio for the current financial year (FY23) is at 2.5 per cent, I am sure it can be brought down further.

IDBI Bank’s share of retail loans in the total loan book is 63 per cent. Do you see some corrections in the mix?

According to the IDBI Bank board-approved policy, retail business must not go below 60 per cent. Retail share is 63 per cent now and the lender is targeting equal growth across all verticals. The ratio may continue as it is.  Even if demand from corporates is more and healthy assets are available, the retail ratio will not go below 60 per cent.

The government and Life Insurance Corporation of India are planning to sell their stake in IDBI Bank. When will the process of inviting bids from prospective investors begin?

I cannot give you an exact date because it is the prerogative of the Department of Investment and Public Asset Management. We are ready for it. My focus is on improving the profitability and efficiency ratios, so that stakeholders get decent compensation from the stake sale and the new shareholder gets a good bank.