IDBI Bank has created a special department for managing bad loans and monitoring credit after taking a series of hits which include being put “under watch” by RBI and a downgrade by credit rating agency Icra. Besides, in an attempt to fulfil capital conservation buffer norms, it may raise about Rs 5,000 crore by selling non-core assets in the current fiscal. “At the head office level, we have set up a separate department what we call it a NPA management and credit monitoring group. It consists of experienced people from both corporate and retail. They are giving focused attention on each case (of NPA),” IDBI Bank Executive Director Pothukuchi Sitaram told reporters here. He also said they are working with other banks to make some of assets live and put them into the stream.
The Reserve Bank last month put IDBI Bank under watch by initiating Prompt Corrective Action against it, a move that placed various restrictions on the lender including on fresh loans and dividend distribution. Domestic rating agency Icra downgraded various debt instruments of the state-run bank on account of weak profitability and deteriorating asset quality, which have resulted in erosion of its capital. It also kept the lender’s ratings under watch with negative implications. Replying to a query, Sitaram said the bank is working on improving its position before going for raising any funds by way of issuing perpetual bonds or selling non-core assets.
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He said they are aiming to garner Rs 5,000 crore though the sale of non-core assets, to be taken up between third and fourth quarters of 2017-18. “We would rather show our performance for the next six months or nine months. By then, we are hopeful of getting better interest rate (for bonds). So accordingly we will plan for that. By that time we will be getting some divestment gains (of non-core assets) and also capital infusion from the government which will also improve the investor confidence. “So the prudent time (for all the activities) will be Q3 or Q4 (of the current fiscal),” Sitaram said.
The bank, he said, is expected to maintain the Net Interest Income at 2 per cent or slightly below to that. Last year it was between 1.7 per cent to 1.8 per cent. IDBI Bank’s annual loss for 2016-17 widened to Rs 5,158 crore, as against Rs 3,665 crore in the previous fiscal. It made provisions worth Rs 4,590 crore in the fourth quarter of the last fiscal to deal with non-performing assets (NPAs) or bad loans. The provisioning was Rs 3,331 crore in the corresponding quarter of 2015-16. The Gross NPAs almost doubled to 21.25 per cent of the gross advances in the fourth quarter of the last fiscal compared to 10.98 per cent in the year-ago period. The net NPAs were 13.21 per cent against 6.78 per cent.