Bank of Baroda saw a sharp fall in Q2 net profit owing to a rise in bad loans and provisioning. At a press conference, the new MD & CEO, PS Jayakumar, and ED BB Joshi, along with the bank’s key management, said the lender still has two more challenging quarters ahead. Excerpts:

Your increase in slippages and provisioning has been a bit too high. Is this a one-time clean-up?

Most of the financials were towards much before I (Jayakumar) came. So, you cannot read it as some kind of a kitchen sinking exercise. We all know that the banking industry, particularly PSBs, is going through a tough phase as far as NPAs are concerned.

Nearly 60% of our corporate portfolio is where we have small shares in consortium lending and, clearly, this is not going to behave differently from the rest. It is for the balance 40% that we have direct control. I would say this — we have at least two quarters that are going to be tough.

You have one account that has been declared as fraud and where the total exposure is Rs 374.48 crore…

It’s a textile company’s account. We have provided 25% of the exposure — Rs 94 crore. It is a multiple banking account and not a consortium account. The nature of fraud is that the bills were discounted under LC and they all bounced. When we tried to settle the security, they were not there. So, we have declared it as a fraud and we are moving legally against the company and the directors.

What is the big revamp that you are going to do?

After the two frauds that have taken place at the bank, we have decided on a overhauling of the entire system. While opening up a new current account, the customer profiling is going to be more robust now.

We have also put a cooling period of initial six months in any current account to allow the outdoor remittances particularly relating to the bigger imports. We are planning to have the centralised transaction review unit — transaction monitoring unit — primarily to have a centralised place where all the alerts that get related are monitored and closed at one place.

We have also floated an RFP to invite experts to take a view to study our internal compliance system, find the gaps and suggest the corrective action plan. That is already done. For our overseas territories also, similar exercise is being done.

Have you done any 5/25 refinancing or a SDR?

During the first quarter, we had some Rs 4,100 crore of 5/25 refinancing, but during Q2 there is no refinancing under 5/25. Under SDR, there is just one case worth Rs 200 crore.
On your provisioning and stressed assets…

The fact of the matter is this provisions came from a small number of accounts, large- ticket accounts. They have been paying, they have been close to the 90-day status. They have been paying every month. In our case, 10.93% of our portfolio is between NPA and stressed assets.

Your outlook on margins…

While you can’t pin down on a particular figure, we would expect better NIM unless the international territories—where the pressure on NIMs is very severe— plays against us.

What is your current exposure to the discoms?

The total exposure is Rs 5,200 crore out of which the restructured book is Rs 3,500 crore;  that’s on credit side. On investment side, around Rs 800 crore.