We are not chasing bulk deposits: S L Bansal

Interview with CMD, Oriental Bank of Commerce

S L Bansal, chairman and managing director of Oriental Bank of Commerce, says it has seen higher slippages in both the large and mid-corporate segment, while recovery was better only in the farm loan sector. Edited excerpts of an interview to Manojit Saha:  

A year before, the bank was expecting a higher reduction in non-performing assets but the increase in these has continued. Why?

Last year, when we gave the statement, we thought the economy will start showing an upward trend, which has not happened. Large companies continue to face a cash flow problem. And, mid-corporates are dependent on large ones for their realisation; their operating cycle has got stretched. The only silver lining is agriculture, where recovery in overdue NPA accounts is better. In addition, there is not much of credit offtake and we are selective in extending loans. So, the NPA ratios are looking further depressed. I think this challenge will continue for another six to nine months.

Which sectors show the highest stress?

All the infrastructure sectors are showing stress. In power, apart from stalled projects, there are a few companies where the commercial operation date (CoD) has been achieved but they’re not able to pass on the increased cost to distribution companies. They are not in a position to take the power at a competitive price. In roads, land acquisition continues to be an issue and in projects that have achieved CoD, traffic is not up to. The entire infra sector is under tremendous stress.

Where do you see the gross NPA ratio by end-March?

We were at 3.87 per cent and we should be able to contain that.

While restructured advances also increased in the banking sector, there are an increasing number of cases where restructuring of corporate debt is not being approved.

Bankers have become tough; they’re insisting the promoters bring in a higher amount of equity upfront for debt recast. Also, we are insisting on personal guarantee of the promoter. We are also looking into the viability of projects more carefully. So, some of the restructuring proposals are failing.

What is the restructuring pipeline for the current quarter?

About Rs 1,500 crore.

Are you planning to sell NPAs to asset reconstruction companies?

We had put on sale Rs 600 crore worth of assets but could not get the right price. We could only sell Rs 200 crore. Now we have put another Rs 1,500 crore worth of assets on the block. It is a continuous process.

During the end of the (year’s) last quarter, there is always a tendency among public sector banks to get high-cost deposits, which result in a spike in short-term rates. What will be OBC’s strategy?

We are not chasing bulk deposits. If there is no credit pick-up, why should we chase deposits?

Are you planning to increase the retail deposit rates?

Not immediately but on a case to case basis, we are offering a higher rate. For deposits above Rs 1 crore, we are paying more, around 9.5 per cent.

What is your guidance on net interest margins?

Our margins have remained steady, 2.8 per cent. However, these will come under pressure. The repo rate (at which the Reserve Bank lends to banks) has been raised by 75 basis points but we are not in a position to raise (our) base rate.