 "We aim to diversify the base on asset & liability side: Sushil Muhnot")
Public sector lender Bank of Maharashtra, which reported 31% growth in income for the quarter ended September, is facing asset quality challenges. The bank’s new chairman and managing director, Sushil Muhnot, in an interview with M Saraswathy and Neelasri Barman, shares his road map to bring asset quality and profits back on track. Edited excerpts:
What are your priorities as the bank’s new chairman?
This is a good and strong bank; its base in current accounts and savings accounts is very strong, as are the relationships on the deposit and asset sides. Also, it is good in the priority sector lending segment. Our strength is agriculture and small and medium business financing.
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All we need to do is get into new areas and tap growing and new segments on the asset side and liability side. The aim is to diversify the base on this front. That will be the next phase of growth.
The finance minister has said micro, small and medium enterprises (MSMEs) do not have adequate lending avenues from banks. Considering you were earlier with the Small Industries Development Bank of India (Sidbi), what steps will you take for MSMEs?
Banks can do a lot of things. The entire financial system should approach MSMEs in a big way. Banks, non-banking financial companies and microfinance institutions should use their entire strength for this segment. Let customers decide whom they want to approach. Of our portfolio, 12-15 per cent is related to MSMEs.
Banks need to have a standardised product and delivery model. They can also have a segment-wise model for MSMEs. One can also use end-to-end software for appraisal and rating, similar to the one Sidbi has. The capability of MSMEs should be developed so that these are ready for funding. These initiatives can help increase banks’ penetration in the MSME sector.
Your non-performing assets (NPAs) have risen in the second quarter compared to last year. What steps are you taking to address this?
This is common to all banks and is a reflection of what is happening in the economy. Monitoring and management of NPAs will be crucial. We need to see which NPAs are temporary and can be rehabilitated, and which have gone deep. We try to use the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act and get the money out. Our task will be to monitor NPAs to see if these can be turned into standard assets; whether regularisation is possible or a one-time settlement has to be considered. This will be the task for the next several months.
We are thinking of coming up with standardised schemes for one-time settlements, through which a large number of cases can be covered. We have a scheme to incentivise field staff for making recoveries.
We also need to ensure new assets do not become NPAs, which is another asset quality concern.