Amid an economic slowdown and policy paralysis, it is definitely a challenge to take charge as the head of a public sector bank, which has made a net loss of Rs 1,509 crore and has a non-performing asset (NPA) ratio of 6.5 per cent, among the highest in the country.
Rajeev Rishi, who took over as the Chairman and Managing Director of Central Bank of India in August this year, talks about his strategy aimed at reducing NPAs and on why the bank will focus more on retail business.
Public sector banks are suffering more than their private sector counterparts because of their exposure to infrastructure, he says.
Central Bank of India has been in a spot with a loss and huge NPAs in the second quarter. What are you doing to fix this?
The NPA level is undoubtedly very high. At 6.47 per cent (or Rs 11,500 crore) of gross advances, the gross NPAs are worrisome. The loss was due to increased provisioning in a few cases. These cases are there in the industry as well and not just specific to my bank.
For example, Winsome Diamonds is an account with all banks. Debt restructuring was planned but it didn’t work out. So, we had to make the entire provision of Rs 1,000 crore. The increase (in gross NPAs) from the previous quarter was also Rs 1,000 crore.
A resolution of NPAs is imperative. We have engaged ourselves in an action plan that essentially covers five activities till March 2014. The major focus is to ensure there is no further deterioration in asset quality and recover whatever is possible.
Also, I cannot stop doing fresh business. But I have slightly tweaked my priorities. I will continue to do corporate credit, but will also focus more on retail credit as it has less stress.
I have a huge network of 4,350 branches. So, I can definitely expect business to happen in majority of these branches.
Hence, I hope that with the focus now on retail and recoveries, we should be able to get our gross NPAs definitely below 6 per cent by March.
Can you elaborate on the recovery steps you have put in place?
We have formed two special squads in regional offices — one to take care of the legal aspect and the other is the mobile team, which goes to the field. I have met the top 30 borrowers of my bank. Similarly, all my zonal and regional heads have met the top 30 borrowers in their respective areas.
I hope something will come out of this and we see some resolutions by March. In terms of slippages, in the next two quarters we expect things to improve (from Rs 5,000 crore in H1 FY13).
Has this “top 30” strategy started to show results?
All those soft NPAs (in the initial stages) have started paying up immediately and once others realise that the bank means business, they would prefer to pay up than face legal action.
On the whole, whatever efforts we put in now will show results over the next few quarters. So far in this financial year, our recoveries have exceeded Rs 880 crore.
Going forward, I am hopeful that in tandem with an improving economic environment, pressure on stressed assets would reduce. I shall be very happy if by FY2014-15, my NPA portfolio reduces by another 100 basis points.
Would you attribute NPAs to inadequate credit appraisal?
You have to look at it in the right context. Look at all the projects that have been stalled. We have projects that have been 80-85 per cent completed.
Banks have already lent money, the infrastructure is already in place, but production is delayed because there is suddenly no gas for gas-based power projects.
The same goes for coal (projects). Nobody anticipated that a coal scam will mean coal becomes unavailable. If you look at the majority of NPAs, it is because of such issues. It is not that we did not correctly assess the demand for loans or gave loans to incompetent companies.
At that time, it looked correct and logical. There are some wilful defaulters, too. They are seriously not having an easy time.
When will the NPA menace end?
It is anybody’s guess. We do hope that there is a stable government, which will take some decisions they ought to take. This uncertainty has to end.
Will you go slower on balance sheet expansion?
We have grown at 14.5 per cent and expect to grow at a similar rate. We were not doing retail earlier, we were not doing agriculture to the extent that I would have liked. We will fund all viable proposals coming from any sector. In retail, the focus will continue on security-based products, such as housing loans and mortgage-based loans.
It would take some time. I hope that all my branches put together will be able to give me (additional) retail business of about Rs 8,000 crore by March. If that happens, I do hope we will have a better mix of business, which is at present skewed in favour of corporates, at about 65 per cent.
You assumed charge about four months ago. How has your experience been?
First, it is a big bank compared with my previous banks (Oriental Bank of Commerce and Indian Bank). In terms of geographical spread, Central Bank of India is everywhere.
Second, it is a big brand. It doesn’t need any introduction. I have a great network of over 4,000 banks. Though I was disappointed with the NPA figures I had to sign on it. Over next few years, we should be able to recover (dues) from most of our clients.
Do you think the problem of high NPAs is a recurring one for new chairmen of PSU banks?
I was expecting this question. When I explained the loss, I said it was only because of a Rs 1,000-crore additional loss from one account. We could not have done anything about it as it was with the CDR cell.
Once we realised we would not recover the money this quarter, we made provisions for the same. The net addition to the NPA was also Rs 1,000 crore. It is normal for a bank of this size. Tanksale (the previous Chairman) would have also done the same.
Private sector banks seem to be getting a handle on the NPA problem. How different is it for public sector banks?
Public sector banks are more into infrastructure lending. I know it sounds too simplistic an explanation. But if you look at power and road projects, most of the public sector banks have lent to them.
And when things go wrong, only PSU banks take a hit. But we have played our role according to the economy’s requirements. Assets have to be put in place. It is not that money has disappeared, but it is stuck and it will get used. It is just a matter of time.