Padmaja Chunduru, MD and CEO, Indian Bank, says there will be much better growth in credit offtake between now and March. In an interview to GEORGE MATHEW, she said the bad loan situation is manageable, Edited excerpts:
Do you think interest rates have bottomed out?
I think so. The writing is on the wall. Now, inflation is higher than expected. I think coming down of rates now may be difficult. We have reached the plateau. How we hold the rates at this level is (all) that matters now and how do you manage the supply and production so that inflation is under control.
Will the RBI’s decision to hold rates boost growth?
The RBI’s tone remains dovish though repo rate change was kept on hold and adding a promise to take steps to boost growth. Continued accommodative stance will boost business confidence further. We can hope that signs of recovery in the second quarter and positive growth projected for the second half will improve debt servicing capacity of corporates going ahead.
Credit offtake growth has remained sluggish. Do you think credit growth will pick up anytime soon?
Our retail and MSME books are growing -– retail is growing at a slower pace than MSMEs, which are growing because of the government-guaranteed loan. We have done a lot of outreach programmes for MSMEs. Our credit offtake growth is at 9 per cent year-on-year. Due to Covid, there has been a slight lull but I think now it’s picking up since October-November festival season.
In the case of corporate, it has moved to the investment book partly because of RBI’s TLTRO funding and all that. So at least Rs 7,000-8,000 crore has shifted to investment books. So factoring in this, corporate has also grown at 5-6 per cent now. Between now and March, there will be much better growth.
What’s the status on loan restructuring scheme approved by the RBI?
When it was first announced, we expected that there would quite a number of requests, both from retail and corporates. Going forward, we find that the retail is very muted — requests for moratorium — even though they are quoted on the website and we have done outreach initiatives.
There is the demand collection graph that we keep on tracking. How much demand is due this month and how much has been collected. Almost 95 per cent of whatever is due is coming. Our borrowers are mostly salaried employees and not from the job-loss segments. They have performed well. So we don’t expect too much from retail. We had anticipated quite a bit and expected it would be something like Rs 100 crore or something, but I think it would be half of that.
Corporates are much more willing to use but even then what we anticipated may not happen. Initially, we thought it could be around Rs 5,000 crore, but it might come to around Rs 3,500 crore to Rs 4,000 crore. Corporates will take (recast) as big companies will take time to come back fully.
What’s the position of MSMEs?
What happened was that there was a spate of restructuring starting last year itself. So most accounts have taken earlier restructuring, which makes them not eligible for restructuring. But MSME is an ongoing process.
Do you think there will be a surge in bad loans because of the withdrawal of the moratorium and the contraction in the economy?
During moratorium, we did not flag NPAs. I think this quarter, we might do it because we expect that it will lift that ban on declaring NPAs. Whichever way it goes, we track notional NPAs.
As moratorium was there and we got extended time to recover old accounts, there was soft recovery going on. There will be higher figure in Q3 and Q4. It won’t be too much beyond normal — maybe 10-15 per cent more than normal. It is not something which is unmanageable but there will be a higher figure.
Do you think this situation will impact your profitability and there will be higher provisions?
Actually, in Indian Bank, we have made a provision higher than what is required for a notional NPA. As per the RBI norms, we have to make 10 per cent, but we have made 15 per cent on all these accounts. There are big accounts which are getting restructured, but there also 10 per cent provision is enough.
We have made some provisions and for Covid, that will take care. The cost of funds is coming down. I don’t see profitability being impacted.
Is the MSME credit offtake picking up?
That (government guaranteed ECLGS scheme) was done very aggressively and very much all over the country. So we had Rs 6,000 crore sanctions under that scheme for the bank. Almost 98 per cent has been sanctioned and 86 per cent disbursed. I think that that’s a very good performance as far as ECLGS is concerned.
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