Bank of Maharashtra lays thrust on lowering NPAs

Mr A.S. Bhattacharya

Source :Anjana Chandramouly:Parvatha Vardhini. C.:Bangalore, Nov. 21

One of the priorities for the new Chairman and Managing Director of Bank of Maharashtra, Mr A.S. Bhattacharya, would be to bring down the bank's high non-performing asset (NPA) level in the next six months.

“Our gross NPAs at 3.58 per cent may be one of the highest in the industry, and we want to reduce it to less than 3 per cent by March,” he told Business Line. He hoped to reduce net NPAs to less than 2 per cent, from the current 2.18 per cent.

NPAs were high on account of Rs 120 crore of agriculture debt waiver added during the quarter.

“And now all NPAs are system driven, and an alarm is generated by the system when any account shows signs of sickness,” he pointed out. For loans of Rs 1 lakh and below, any signs of sickness would be addressed by the branch office, while the regional office would address sickness in loans of Rs 1 lakh to Rs 10 lakh and the head office will handle loans above Rs 10 lakh.

According to him, 64 per cent of the bank's NPAs was from small and marginal borrowers, and to “arrest gross NPAs and net NPAs, we plan to set up five micro-asset recovery units in Maharashtra for the recovery of small loans,” he said. The exclusive teams will only work on recovery of these loans.

Since the bank has over 900 of its 1,500 branches in Maharashtra, these units would be set up there, and if the experiment is successful, “we will set up such units in Bangalore, Hyderabad and Uttar Pradesh,” he added.

As of now, the bank is not looking at Chennai, “but if small loan recovery does not happen in Chennai, we will set up a unit there,” said Mr Bhattacharya.

On the dip in profits in the second quarter of this fiscal, he pointed out that provisioning was doubled during the quarter to strengthen the bank's balance sheet.

The bank was also hopeful of growing its net interest margin to 2.7 per cent by the fiscal-end from current levels of 2.54 per cent. With the bank's cost of deposits at 5.24 per cent now, Mr Bhattacharya felt that it will increase as a result of the recent monetary policy.

By March, he expected it to be between 5.3 per cent and 5.35 per cent.

This would put pressure on net interest margins, he admitted, adding that the silver-lining was that the bank's yield on advances, which was 9.14 per cent during the second quarter, would increase to 9.6 per cent soon.

This would be achieved mainly by re-pricing the below-the-base-rate advances of about Rs 4,000 crore. “And this would increase our net interest margin slightly,” he said.

Shedding high-cost deposits

The bank also hoped to grow its balance sheet by shedding high-cost deposits. As on March, the bank's high-cost deposits stood at Rs 11,000 crore, which has now been reduced to Rs 6,000 crore.

The bank targets a 20 per cent growth in business to Rs 1.2 lakh crore by the fiscal-end, with targeted deposits and advances of Rs 70,000 crore and Rs 50,000 crore respectively. Mr Bhattacharya said he expected the CASA (current account savings account) ratio to touch 41-42 per cent by the year-end from the current 39 per cent.

On whether the bank would increase its base rate, “as of date, we will not increase our base rate. But it will be market-driven,” he said. The bank's base rate is 8.25 per cent now.