Indian Overseas Bank (IOB) will enhance lending to MSMEs as well as give out more home loans, its CEO Karnam Sekar said and expressed hope that the bank will turn profitable soon.
"We have devised a formula-based plan so that our recovery position is further improved. Our focus on recovery is yielding good results but our target would be on growing MSME and retail portfolios," Sekar told PTI in an interview here.
The Public sector bank, which is under the RBI's prompt corrective action (PCA) currently and has been incurring losses for the past 18 quarters, posted large losses because of huge non-performing assets (NPAs) for the past 7-8 years, caused mainly on account of large exposure in the corporate sector, he said.
Sekar added that the bank made the required provisioning. As a result, net NPAs (as percentage of total advances) as on December 2019 has come down below 6 per cent and that is a criterion to bring the bank out of the PCA, he said.
The bank's managing director and chief executive officer (MD & CEO) said that the next criterion is to make some profit. "So, this quarter onwards, not only this quarter but also for the coming quarters, we are likely to make profits."
"In the MSME segment, we are right now in the range of Rs 31,000 crore lending portfolio, we want to grow that portfolio to Rs 50,000 crore in the medium term of 2-2.5 years. Similarly, in home loans, we are at Rs 13,000 crore level right now and we want to make it to at least Rs 25,000 crore in the similar time frame," he said.
While the average ticket size for the retail home loan segment is targeted to be raised to Rs 25-40 lakh from the existing Rs 20 lakh, there will be special focus on growing MSME (micro, small and medium enterprise) loans by targeting textile, automobile and small industries, he added.
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"With reduction in TAT (turnaround time) and improvement in service, we have good demand for our limited growth. In MSMEs, we have 250 branches with specialised people. We have trained almost 700-800 people and put them in these branches, they will focuss mostly on MSMEs, Sekar said.
He said the bank has a focussed approach especially in few clusters like Tirupur and Coimbatore in Tamil Nadu where there are some industries, specifically engineering, automobile and textile.
Detailing about the bank's stepped up recovery process, he said the bank has put in place a robust mechanism and created asset recovery branches.
"We have created asset recovery branches, we have identified 16 such branches and these NPA accounts have been shifted there. These are being directly controlled from the central office."
Apart from that, IOB has also started to auction the pledged properties to recover its outstanding.
"We have identified more than 8,000 properties. We have been doing this on a monthly basis from July (2019) onwards, every month we go for mega e-auction. And, in this, we are seeing some good amount of success," Sekar said.
He said the bank has also deployed a scheme for one-time settlement, where loans up to Rs 25 crore are eligible. Earlier, the loan amount under this was Rs 3 crore.
"There is some haircut but that (one-time settlement) is also yielding good results," Sekar said.
On the recovery front, he said it has gone up and the bank has been able to arrest the slippages by strengthening that department and putting up an appropriate structure to monitor from the central office.
Slippages in the RAM (retail, agriculture, MSME) segment has come down. It is stablising at Rs 400-500 crore every quarter, and has an overall portfolio of Rs 1 lakh crore.
"It has now come down to 1.5-2 per cent, which was earlier 3-4 per cent. We are trying to still reduce that. We are in a much better position from maybe one-and-a-half year earlier. In the corporate sector, slippages were of course there. Even in the December (2019) quarter, we have had one such big account," he said.
Sekar added that going forward, we do not see such slippages because we have screened all the accounts. "For the corporate segment, it will be almost near zero. So, that ways, additional NPAs will not be there."
He said the company's focus on recovery is yielding good results and the bank's actual operating profit is in the range of Rs 550 crore every quarter. "This recovery, in return, is giving the provision back to us."
"In the last four-five years, we had made aggregate provision of more than Rs 40,000 crore. So, out of this Rs 40,000 crore, even if I am able to bring back 5 per cent on an yearly basis, I will be able to recover Rs 2,000 crore every year that will directly add to the profit," he said.
With the net NPAs falling below 6 per cent as on December 31, 2019, and expected journey back to profits from this quarter onwards, Sekar hoped the bank would soon be able to come out of the RBI's PCA framework.
IOB posted a staggering loss of Rs 6,075 crore for the third quarter ended December 2019, due to higher provisioning for bad loans. There was a net loss of Rs 346 crore during the corresponding quarter of 2018-19.
While the gross NPAs have been brought down to 17.12 per cent at the end of December 2019 as compared with 23.76 per cent a year ago, the net NPA ratio improved to 5.81 per cent, which is less than 6 per cent prescribed by the Reserve Bank of India.
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