Canara Bank firms up Plan to Recover Bad Loans

Interview /R K Dubey/Indian express/16 Mar 14

Canara Bank saw its net profit decline by almost 50 per cent in the third quarter of FY14. With higher provisioning for bad loans and accounts of big defaulters in its books, the Bangalore-based bank is looking to address concerns over rising Non Performing Assets (NPAs). Chairman and Managing Director RK Dubey tells Sharan Poovanna how the bank aims to recover from its not-so-memorable Q3 performance.

What measures will be put in place to recover from the poor Q3 performance?

Net profit showed decline y-o-y on account of higher provisions, which increased to Rs 3,087 crore from Rs 2,046 crore a year ago. The bank has strengthened its recovery efforts and monitoring system to contain NPAs in Q4. We are focusing on CASA (customers’ current and savings accounts), retail liability and retail assets growth, including MSME and agriculture, which will improve net interest income.

How does Canara Bank propose to bring down its NPAs given the big defaulters?

The efforts include monitoring high-value NPA accounts through specialized asset recovery management branches, monitoring newly slipped accounts to ensure better and early recovery, conducting Adalats at circle levels, one-time settlements (OTS) with improved offers, initiating SARFAESI action in all eligible cases, declaring wilful defaulters wherever applicable, filing criminal complaints in case of frauds, apart from filing recovery suits and extensive use of Lok Adalat mechanism. We have identified a portfolio of bad assets worth about Rs 1400 crore for sale to asset reconstruction companies. This is another step to improve our recovery.

How much has the bank provisioned for bad loans?

We have provided Rs 568 crore of provisioning for bad loans for Q3 FY14 (stand alone). Total provision for Q3 has gone up to `3,087 crore compared to Rs 2,046 crore a year ago. Canara Bank has initiated proactive steps to prevent the incidence of overdues. We are generating daily reports of accounts, which are likely to figure in special watch or delinquent list of accounts in the next 30 days. These accounts are flagged off to different functionaries to take steps to prevent them from appearing in special watch list of accounts on completing 30 days. We have also put in place a dedicated restructuring assets division to extend restructuring, depending on viability. With all these initiatives, we are confident our gross NPA ratio will be in the range of 2.6- 2.7 per cent as of March 2014.

What is the topline and bottom line target this fiscal? What are the challenges to achieve the same?

We aim to reach an aggregate business figure of more than `7 lakh crore with deposits growth of 16 per cent and advances growth of 22 per cent. With continued macroeconomic slowdown, several sectors are facing stress. Consequently, there is a spike in NPAs at the industry level. In our bank, we are taking special efforts to control NPAs and slippages.

What efforts will bank undertake to increase CASA?

The bank’s advances are growing at around 27 per cent at present much higher than the industry average. To improve the bank’s CASA deposits, we have introduced several measures which includes issue of debit cards for student, waiver of charges on banking instruments like demand drafts and money tranfers.