Kotak Mahindra Bank on Thursday reported a surge in its first quarter net profit while maintaining the asset quality. The bank said it has exposure to four out of the 12 accounts identified by the RBI for insolvency proceedings. In a media interaction, joint managing director Dipak Gupta and president and group chief financial officer Jaimin Bhatt, indicated that stressed asset purchases might pick up in the next six to 12 months. Excerpts:
You indicated some sort of slowdown in business banking. What is the outlook?
Post demonetisation and pre-GST, I believe there was some degree of cautiousness. Probably, that’s why it has not grown. Hopefully, once this thing goes behind, growth should come back.
How much exposure do you have to the accounts referred to NCLT?
We do have exposure to four of them. But all four of them have come to us through the merger. None of them was originated in the Kotak system. Our provision numbers are far in excess of what the RBI requires. Today, our net exposure to those is about Rs 46 crore, gross is Rs 236 crore.
Your capital adequacy ratio for this quarter is about 19% which is significantly higher. Where would this capital be deployed?
We did a capital raising this quarter. That has helped push that up. We did Rs 5,800-odd crore of QIP in May. When we did the issuance we said we are open to inorganic growth, we are open to things which are happening in the stressed space, a lot of other areas.
Anything that you bought on the stressed assets front?
Not significantly. It is routine. I think it will start picking up over the next six to twelve months. For a long time, we have been waiting for the policy and people to be comfortable in selling. A stressed asset acquisition makes sense if the price is reasonably fair. I think it takes time before a bank is okay selling it at a certain price. All the policy measures show that increasingly banks will be more comfortable selling those assets.
What about meeting your priority sector lending requirements?
Meeting the overall 40% target is easy. The more difficult ones are the sub-segment requirements. Let’s say the small marginal farmer segment. It is difficult for a bank like us to meet the requirement on our own. That’s why we have to do some purchasing.
Tell us something on 811 digital banking initiative?
You will see a lot of banks actually adopting that process for customer acquisition. Basically, it is streamlining a process which typically takes four-seven days into a 5-minute one. By doing this, it is extremely convenient for the customer and it saves a lot of cost for the bank. I think it will become hygiene for the bank. When you do this, you will get all types of customers. Each bank will probably select customers who are suitable for that kind of bank. We have spent a lot of money on advertising. It is a new way of acquisition.