bank carrying gross NPA 29,000 crore, which is 14.9% of its outstanding loan portfolio.
Two days later, managing director MV Rao told ET, “We are aiming to bring down gross NPAs below 10 per cent by December this year.” reserve Bank of India Removed trade restrictions on the bank under the prompt corrective action framework.
This will be achieved through a combination of strategies – Transfer of Bad Debts to National Asset Reconstruction Company Limited (NRACL), selling off bad loans to other asset reconstruction companies and technically writing off the loans, Rao said.
The bank is in fact in the process of transferring three or four bad loan accounts, including one belonging to the Future Group, to NRACL. This will help in reducing the bad debt of Rs 1500 crore.
However, its net NPAs stood at 3.93%, well below the 6% risk threshold. This shows that the bank has made adequate provisions against a large part of its bad loans.
The Mumbai-based lender is the last to exit the PCA framework, which begins when banks breach three primary risk thresholds based on parameters such as net NPAs, minimum capital norms and return on assets.
Rao said the bank is adequately capitalized to support the growth with loanable resources of Rs 38000 crore. Its capital adequacy ratio stood at 13.3% at the end of June.
“However, it has been said that you should raise capital when it is doing well. So, as RBI lifts the PCA restriction, our board will discuss this point,” Rao said.
The bank is targeting to grow its loan book by at least 12% in this financial year from the gross advances of Rs 1.90 lakh crore by March 2022. The retail, agriculture and MSME (RAM) loan book contributes 65% of the total advances while the rest is corporate book.
Rao said that the bank is ready to offer competitive interest rates on loans for business expansion. “I have pricing power. With Casa At 51%, I have big room for a good property price,” Rao said.
The high ratio of low-cost current and savings accounts (CASA) helps banks reduce the cost of funds.
The bank is also contemplating to hire 1800 people in the current financial year to strengthen its manpower.