Have classified loan to Kingfisher as NPA: MS Raghwan, Bank of India

ET Now Feb 23, 2012, 03.56PM IST

In an interview to ET Now, MS Raghavan, ED, Bank of India, discusses the bank's upcoming preferential allotment and performance figures. Excerpts:

ET Now: Bank of India has announced that it will be raising capital through a preferential allotment of about 7 crore fresh shares to government of India and to LIC. At what price are you planning to raise money and what will be the exact quantum of shares which will be allocated?

MS R: Though the enabling provision has been passed for 7 crore shares to each one of them, the quantum of shares which are going to be allotted to government of India is to be to the tune of 2.75 crore shares and 2.73 crore shares will be to LIC of India.

By this preferential allotment, the bank intends to mop up around Rs 1800 crore of additional capital. The pricing of the preferential shares will be strictly as per SEBI guidelines.

ET Now: What about your credit growth targets for FY13? Besides the preferential allotment, would there be any further capital raising?

MS R: Actually the industry growth forecast has been reduced to 15% or say 18%. Our bank too is recording 15-18% growth.

In addition to this, if you see our CRAR position, it was very comfortable at 12.17 as on 31-03-2011.

On 31-12-2011 also it was 11.18 but granting that profit during the year has not been taken for the calculation, CRAR almost remains unchanged.

However because of Basel III, the accent has now shifted to core capital. Regarding core capital, as per the prescription of RBI vis-a-vis our bank, for the first three years, in fact, up to 2015 we are comfortable.

Beyond that, we fall short of the core capital. All these measures are intended to mop up the core capital from the year 2015 onwards. Till such time, with the projected credit growth of about 15-18%, our bank is comfortable.

ET Now: Bank of India has an exposure of Rs 575 crore to Kingfisher Airlines. Has the account now been classified as NPA and if yes, what are the provisions you have made in the Kingfisher account for the quarter gone by?

MS R: In fact, the bank had classified the account as NPA as on 31st December 2011. The provisions have already been made, close to about Rs 160 crore we have already made provisions. In the new dispensation, there are eight banks which have classified (the Kingfisher account) as NPA and our bank is one among them.

ET Now: As per the recent news items, would the Bank of India participate in giving further loans toKingfisher Airlines if the consortium decides so?

MS R: There was a consortium meeting held recently in which various aspects were discussed. In this, Kingfisher Airline was asking the bankers to give an interim finance of about Rs 200 crore so that the grounding can be stopped and the airline can continue functioning.

However, there are about eight banks, including Bank of India, which have classified these accounts as NPAs whereas 10 banks have not classified it as NPAs.

It was generally discussed that each one of them will chip in with about Rs 20 crore of further finance.

With the 10 banks chipping in, about Rs 200 crore of finance will be mopped up to enable Kingfisher continue its operations.

As to restructuring, Bank of India has already restructured it once and the account has slipped into NPA. There is no way the account can be restructured again without taking a hit. The economic viability has to be ascertained before any such step is taken. In addition, we are looking at the account getting upgraded before we embark on any such restructuring exercise in the future.

ET Now: Which are the other key sectors where you see stress in the coming months?

MS R: Nothing. Because of the downturn in the economy, projections have brought down the GDP growth to 6.9%. There is a general slowdown which is noticed.

Nothing very pronounced to say that this sector per se is affected. There is some strain visible in telecom and aviation.

In the steel sector too, a little bit of anxiety is cropping up, but I do not say there is any systemic effect. We do not see any great strain in any big sector.