Central Bank of India has managed to improve on most financial metrics since it was brought under the prompt corrective action (PCA) framework, managing director and CEO Pallav Mohapatra tells Shritama Bose. The bank is working to turn in a profit in Q4FY19 and a full-year profit in FY20, he added. Edited excerpts:

What is the strategy for getting around PCA?

The strategy covers both income and cost side. On the income side, we have to improve the revenue and quality assets. We are focusing more on the better-rated companies. We are focusing more on the retail assets, especially where the risk weight is lower. On the cost side, we are focusing more on low-cost deposits, which are current account and savings account (CASA) deposits, and we are also curtailing the expenses. We are closing or merging approximately 50-odd branches. Most of these branches will be in metro or urban locations. We don’t want to close branches in RUSU (rural and semi-urban) areas.

How are you approaching corporate lending?

Whenever we do a loan of over Rs 5 crore, we always look at how much is the additional risk weight involved and how much income we are going to earn from it. With this process, we have been able to reduce our risk-weighted assets from the end of March 2018 and we hope that there will be further reduction.

How easy or difficult is it for a bank like yours to expand its retail loan book?

It is not that tough. So far, we have been successful in increasing the housing-loan portfolio. As of today, it would be around 20% of total advances, which I intend to take to above 30%. My RAM (retail, agri and MSME book) is more than 67% and I want to take it to 75%. If you look at the branch network, 70% are in rural or semi-urban locations. So, definitely, there is a lot of potential for us to grow. There is competition, but we are equipped to face it and in RUSU locations, we definitely have an edge.

Has the bank shown improvement in terms of the metrics that the regulator look at while applying PCA?

Our gross non-performing asset ratio has come down between June and September. It is expected to come down further in December. On net NPA ratio, we are a shade above 10%. All efforts are being made to bring it down to between 6-7%. Risk-weighted assets are also coming down. The only issue is return on assets. Now, for the last three consecutive years, the bank has been making losses. In the current fiscal also, there have been losses in Q1 and Q2. Possibly, there will be a loss in Q3 as well. We are on track to close the year with a nominal profit in Q4. In FY20, we might see profit on a full-year basis.

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At the industry level, have we seen most large slippages play out or are there further risks with the likes of IL&FS and Jet?

A major portion has been recognised. Earlier, recognition was an issue because there were restructuring mechanisms which kept some accounts from slipping. But now, since all these instruments have been taken away, by March 31, 2018, the recognition of all those large accounts was completed. Some of the assets which have been hovering in the SMA-1 and 2 categories may slip because there is not much support from the ecosystem. Banks are now focused on saving or restructuring those assets but doing so without increasing their exposure to them. In cases where there is an absolute need for fresh exposure, a matching amount must come from the borrower.