State-owned bank carrying gross NPA A burden of ₹29,000 crore, which is 14.9% of its outstanding loan portfolio.
“We are targeting to reduce gross NPAs to below 10% by December this year,” said Managing Director MV Rao Told ET.
reserve Bank of India ,reserve Bank of India) on Tuesday lifted trade restrictions on the bank under the prompt corrective action (PCA) framework, leading the stock to rise nearly 10% the next day.
Rao said the shortfall would be achieved through a combination of strategies – shifting bad loans National Asset Reconstruction Company Limited (NARCL), selling bad debts to other asset reconstruction companies and technical write-off of loans.
The bank is in the process of transferring three or four bad loan accounts, including one linked to the Future Group, to NARCL. This will help in reducing ₹1,500 crore in bad loans.
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 growth with loanable resources of Rs 38,000 crore. Its capital adequacy ratio stood at 13.3% at the end of June.
“However, it is said that you should raise capital when it is doing well. So, as RBI lifts the PCA restrictions, 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 ₹ 1.90 lakh crore by March 2022. The retail, agriculture and MSME loan book contributes to 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 a huge room to price a good property,” Rao said.
The high ratio of low-cost current and savings accounts (CASAs) helps banks reduce their cost of funds.
The bank is looking to hire 1,800 people in the current financial year to strengthen its manpower.