Better recoveries help banks lower gross NPAs

Source : BL:ANJANA CHANDRAMOULY & PARVATHA VARDHINI C.
 :BANGALORE, MARCH 22:2011

Recoveries have been a high priority for banks that saw their gross non-performing asset (NPA) figures growing over 50 per cent during the 2009-10 fiscal.


 Tighter control over assets and recoveries, wherever possible, have helped some of these banks move towards a healthier balance-sheet this year.

“A fairly good recovery and upgradation of assets have helped us bring down our gross NPAs during this fiscal,” Mr M. Narendra, Chairman and Managing Director, Indian Overseas Bank, told Business Line.


 Indian Overseas Bank is among the banks that saw over 50 per cent year-on-year growth in gross NPAs for the year ended March 2010.


 Some others include Lakshmi Vilas Bank, Bank of Maharashtra, Bank of India, ING Vysya Bank and State Bank of Mysore.

Tighter norms

IOB has seen cash recoveries of about Rs 878 crore and upgradation of Rs 395 crore so far this year. Tighter control norms have ensured reduced incremental slippages for the bank, he pointed out. During the third quarter of this fiscal, slippage was Rs 183 crore, while it was Rs 356 crore and Rs 758 crore during the first two quarters. Besides, Mr Narendra explained that 78 per cent of accounts had collateral security coverage.

Old private sector Lakshmi Vilas Bank's numbers have also been improving this fiscal, and this, its Executive Director, Mr V. Prakash, said has been achieved by aggressive recoveries and also sale of NPAs worth Rs 70 crore to an asset reconstruction company. “We have a very tight system-driven monitoring process in place, and also a better quality of portfolio. We are looking at recovering through settlement,” he added. So far during the fourth quarter of this fiscal, the bank has brought down its gross NPAs to Rs 136 crore.

Micro recovery cells

Though the gross NPA levels for Bank of Maharashtra as on December 31, 2010, show an increase to Rs 1,377 crore from Rs 1,209 crore in March 2010, on a sequential basis the bank has shown an improvement — from Rs 1,467 crore in September 2010. According to Mr A. S. Bhattacharya, Chairman and Managing Director, Bank of Maharashtra, the bank has set up 10 micro asset recovery cells, and conducts recovery camps and Lok Adalats regularly. About 64 per cent of the bank's NPAs are small in nature, he pointed out. “We intend to increase the number of these cells, and will review during the next fiscal,” he said.

NPA target

Going forward, IOB wants to keep its gross NPAs at Rs 3,000 crore this fiscal-end, and “our long-term plan is to keep it at Rs 2,000 crore”, said Mr Narendra. For LVB, the targeted ratio is 1.5 per cent by March 2012; however, “our focus is on reducing the absolute number to Rs 100 crore this fiscal end,” pointed out Mr Prakash. Mr Bhattarcharya hoped that Bank of Maharashtra's recovery efforts will help it close the year with gross NPAs of Rs 1,250 crore; “by September 2011, we aim to bring down the ratio to below 3 per cent,” he said.