Despite Dhanlaxmi Bank reporting a 28% sequential rise in gross NPAs in the December quarter, MD & CEO PG Jayakumar believes that recoveries will pick up and the gross NPA ratio come down to 3.5% by the end of this fiscal from 7.05% in Q3FY14. In an interview with Shayan Ghosh, he maintains that the situation is under control. Excerpts:
The bank reported a net loss of Rs 119 crore in Q3FY14. How do things appear right now?
There is no trouble; the issues are all temporary. The problem was primarily on the NPA front: Last year, there was a slippage of about Rs 528 crore, of which we have recovered Rs 300 crore. This year, there was an NPA slippage of about Rs 251 crore up to Q3, of which we have recovered about R100 crore. By the end of this fiscal, we would like to bring the gross NPA level down to 3.5%.
Your gross NPA levels have risen from 5.31% in Q2 to 7.05% in Q3. Why?
This is because of some mid-corporate bad loans. In many of these, only small amounts needed to be recovered; and around Rs 40 crore is in the pipeline. Of our gross NPAs of R546 crore, we plan to recover at least 50% by the fiscal end. We are taking stringent action like constant follow-ups from the monitoring and recoveries department, and we believe it will pay off.
What is the growth focus for Dhanlaxmi Bank now?
Up to 2009, we had only organic growth. After April 2009, we started acquiring assets from non-banking financial companies, which helped the book grow at 45-50% in the following two years. Apart from this, we started a new retail lending structure, wherein we planned to lend R200 crore every month during 2010-12. However, that model was not viable as the base was not very large and a 45% growth was not feasible. Now, we are focusing on organic growth alone. We have also reduced our corporate book and aren?t going for further buyouts.
Where does your bank stand with regard to Basel-III capital requirements?
Our total capital-adequacy ratio (Tier-1 and Tier-2) stands at 10.06% after we raised R67.2 crore ($10.8 million) by allotting 17.5 million equity shares at R38.25 per share to qualified institutional buyers in November. The Tier-1 capital is at 9.04% after we factor in this fund-raising.
Any chance of bad loans piling up quarter after quarter?
Our npas are fully under control and, though some wrong decisions in the past have caused deterioration, I am confident of containing them. In case of most of our loans, we have good collateral coverage.
