Dena Bank expects a net slippage of R200 crore in the July-September quarter while dealing with a restructuring pipeline of nearly R900 crore, says chairman and managing director of the bank Ashwani Kumar. In an interview with Vishwanath Nair, he said the capital infusion by the government is expected by September, otherwise the bank may have to revise its credit growth estimates. Excerpts:
Major private sector lenders have raised their base rates in last two weeks. Is a rate revision on the cards for you?
As of now, there is no such plan. But that is as of now. The whole situation is very dynamic. You may decide something today and tomorrow you may have to change your view. RBI has already done open market operations worth R8,000 crore. They have given a clear indication they don’t want the long-term yields to go up. We currently have a base rate of 10.25%.
What kind of mark-to-market hit are you expecting in your profitability this quarter after the recent spike in bond yields?
Our statutory liquidity ratio (SLR) holding is at 28% as of now. There will be a hit, but it will depend on what yields are on September 30.
Your?s is one of the three banks identified by the finance ministry for capital infusion. Now that the government has indicated the September deadline for capital infusion may not be met, how do you think you will manage the situaiton?
Our Basel-III capital adequacy ratio was around 10.54% of which Tier-I was touching 7%. We have sought R2,000-crore capital from the government and we are hopeful that R1,500-1,600 crore will come in. We had not shown much credit growth in April-June quarter due to our capital position. In fact credit growth had come down slightly from the March quarter. If we do not get capital then we will have to restrict our credit growth target compared with the current target of 16%. We are hopeful the capital infusion will happen in September.
Considering that larger banks are gaining more business due to refinance of loans, has it affected your business growth? Have a lot of customers moved to cheaper options?
Big corporates may move away. That is fine. But smaller businessmen also look at aspects other than interest rates. People who have had a relationship with us for over 15-20 years will stick with us. Though people do try to bargain on rates by quoting the rate offered by larger banks, but most see reason when we tell them that we cannot go below our base rate of 10.25%.
What will drive growth for Dena Bank in the second quarter?
We are putting our efforts behind retail and small and medium enterprises (SMEs) to drive growth. We have camps for the retail customers, we have also revised rates for SMEs. Now the interest rate for SMEs ranges between 11 and 13%. We have also started celebrating SME day every month where all our branches approve at least one SME loan account. In our recent retail campaign, we have approved loans worth R479 crore for over 2,675 accounts. Non-performing assets (NPAs) are a little high in this sector, but it is not of a major concern.
What does the slippage situation looking like for the quarter? What is the corporate debt restructuring (CDR) pipeline looking like for you?
Worst case scenario our net slippages for the quarter will be about R200 crore due to a number of smaller accounts. If our credit does not grow, the gross and net NPAs will rise as a ratio of the total assets. We have a restructuring pipeline of about R900 crore for the second quarter. There are a number of large accounts which are coming into the CDR cell together.