Although IDBI Bank reported a year-on-year increase in its gross NPAs and a 5% growth in its loan book, the lender is confident of a revival in the coming quarters. Speaking to reporters, Kishor Kharat, MD & CEO, said, going ahead in Q3 and Q4, the bank expects further improvements as it has started focusing on the retail portfolio.

What will be your strategy going ahead?
It’s consolidation, rebalancing and qualitative improvement in all the financials. Going ahead in Q3 and Q4, we will see further improvements as we have started focusing on our portfolios. We have started giving more focus on retail business, which has improved our Casa. The basic issue with our bank was we were not growing our loan book because we have increased our priority sector lending, which was not the case earlier. Now, we can increase our loan book.

There are a lot of opportunities for us to develop the loan book. We are developing a lot of synergies with our subsidiaries and institutions like Exim Bank, Sidbi, which were created by IDBI Bank.

We are the principal banker with Indian Railways. We are focusing on retail deposit, which means low-cost deposits. Our composition of deposit is changing and we are reducing high-cost deposits drastically. We are open to providing our project appraisal services to the banking industry. Once our loan book increases, the NPA percentage will also start looking small.

What is your outlook on NPAs? Have you sold any bad loan to ARCs?
The kind of sanctions we have done in Q2, I am sure in the third quarter you will find good growth in our loan book. It will helps reduce our percentages of stressed assets.

There are one or two chunky assets that have slipped. Among the top ten accounts that have slipped in Q2, the smallest one is R15 crore and the highest one is R400 crore; so, that indicates that actually only one or two chunky accounts are there and the rest are all small.

We have not done any sale to the ARCs, but are working on it. Unless we get better price, I don’t think we will sell it as all our assets are good and we don’t really need to sell them.

How did you grow your net interest margin in the quarter?
There is no other income that is coming out of sale of assets or non-core assets; everything has actually come from the change of internal business composition.

If you look at the earnings, the retail and commercial side (SME and agri) has contributed more than 90% in this quarter because it has better spreads, which has actually helped us increase the net interest margins.

On the term lending side, if you see whatever development financial institution portfolio we are carrying, the spreads are very low.  We normally do not get much spreads on corporate finance, the other commercial activities where we are going for broadbased growth, we are started getting more aggressive.

Did any chunky asset slip into bad loan category in Q2?
There are certain accounts which have slipped, but if you look at the incremental slippages or the incremental NPAs, the rate is actually reducing from March onwards, then in June and, again in September, it came down.

Those accounts that we are trying to save all these days were getting saved or were on the brink of becoming NPA; this quarter, they have slipped and, therefore, the provisioning has increased.