We hope to come out of PCA this year: Indian Overseas Bank CEO Karnam Sekar

Indian Overseas Bank (IOB) has been under Prompt Corrective Action (PCA) for almost four years from 2015, since when it has been suffering losses. The bank is trying to return to profit and come out of PCA. Karnam Sekar, who took over as managing director and chief executive officer of the bank on July 1, is taking measures and, in an interaction, talks to Gireesh Babu about the bank’s expectations. Edited excerpts: 

What are your plans to come out of PCA? When do you expect that?

For the past five years we have been making losses due to huge non-performing assets (NPAs), which led to PCA. Our net interest income (NII) has not been improving because we are not growing our book for four to five years. The net interest margin (NIM) is also one of the lowest.

Our focus now is on recovering big-ticket accounts, improve NII by stepping up advances, and concentrating on assets like housing and jewel loans, which have a lower risk weight. We will continue to focus on CASA (current accounts, saving accounts), which have been improving for the past few years. We are slightly behind the public sector banks’ growth in this, so we are focusing on that also. With the improvement in NII and the NIM, we hope to increase operational profits and make net profit this quarter. We hope to reduce net NPAs and come out of PCA during this year. 

How you are approaching NPA issue?

Recovery is slightly more than the slippage, so fresh addition to NPAs is not there. We were able to bring down the gross NPA ratio to almost 21 per cent. But the net NPA ratio is at 10.81 per cent and we need to bring it down below 6 per cent if we want to come out of PCA. Three broad ratios for coming out of PCA are capital adequacy, net NPA, and profit. We will make profit. On capital adequacy we are on the borderline and should be able to maintain that. The net NPA ratio is a critical issue, we need to bring it down to at least 5.9 per cent. Therefore, the focus is on that area. I am hopeful.

We have initiated small one-time settlements (OTS) up to Rs 3 crore. That is giving us good traction. In the first quarter we have done 10,000 numbers. We are appointing a special task force on this. In next two quarters, we are expecting very good numbers. We are looking at some big OTS accounts also. We will look at sales of asset reconstruction companies (ARCs). Last year they were not much, but in 2017-18 there were more ARC sales. We may go for some big-ticket ARC sales.

How much are you requesting the government to give you this year?

At the beginning of the year, we requested around Rs 6,000 crore. Last year also the government gave around Rs 5,900 crore.

How much have you recovered from the defaulters the Reserve Bank of India (RBI) referred to the National Company Law Tribunal (NCLT)? How would it help you to come out of PCA?

We were there in every account, but our percentage is in the range 2-5 per cent. NCLT 1 and 2, barring two accounts, we have not done any recovery so far. We are not considering NCLT recovery as part of our strategy to come out of PCA. We will go after other options. If the NCLT comes in, it will be additional recovery. That is a judicial process, and we are not sure when it will come. Many accounts we were hoping to come in by September 2018 have not come. So we will go after other accounts.