The process has only been halted for accounts in default on account of Covid. If the default happened earlier, that can always be taken to NCLT.
Central Bank of India is referring to court personal guarantors in bad loans with an over Rs 50-crore exposure, MD and CEO Pallav Mohapatra told Shritama Bose. The impact of the moratorium on asset quality will be limited as the payment of deferred interest will be spread over a period of time, he added. Excerpts:
What is your board-approved policy for the recast scheme?
There are three segments here. The first is MSME, where not much redesigning has to be done because restructuring has already started earlier. The scheme has to be designed for retail loans and corporates. For corporates, the only difference from past exercises is that we can carry out restructuring without a change in the management. The third is the p-segment, where we are seeing a first-time regulation from the RBI. In terms of the number of cases, the pressure will be more in the retail segment. Not many corporates are approaching us. Those who belong to the heavily-impacted sectors are asking for some restructuring. For MSMEs and corporates, it will be done through the centralised processing centre. It will not be left to branches. To the extent possible, it will be seamless and focused.
What are the eligibility criteria you have for retail and what will be the procedure?
If somebody has cash, there is no point in restructuring those accounts. So what are the yardsticks to determine that a person has cash? The parameters we have selected are: those who have lost their jobs and those whose salaries have been cut. These are the two major criteria, based on which restructuring has to be done. The ratio of self-employed borrowers is not very high for us. In that segment, we normally lend to professionals like doctors and architects. Their cash flows are certainly getting affected. That is as good as not getting their salaries and they will be treated accordingly.
As the moratorium ends, do you expect a spike in bad loans?
The moratorium is not that problematic. Even if someone has taken it, they are not going to pay the six months of EMIs September onwards. Their EMI will become a little bit higher on account of compounding of interest during the six months. That incremental amount is not going to pose much of a problem. So there should be no spike in NPAs on account of moratorium.
The NCLT process has been suspended for a year and that route for recoveries has effectively been halted. So what is your outlook for recoveries?
The process has only been halted for accounts in default on account of Covid. If the default happened earlier, that can always be taken to NCLT. Most NCLTs are now opening up and we are taking (cases there). We have also started taking guarantors to the NCLT. I do the review of all cases of Rs 50 crore and above. If I see that there is a personal guarantee and no action has been taken or DRT action has been taken but not NCLT action, I am giving the instruction to immediately file insolvency against these guarantors. Where I will not do it is if they come out with a resolution plan or they come with a one-time settlement (offer) which is agreeable to me. That would mean they are cooperating with the bank. If you are not cooperating with the bank, and in the NCLT some third party is going to buy it, why should I leave you? Why should I not make you insolvent so that for five or seven years you are unable to do business?
Banks are being accused of holding back credit growth. What is your strategy in an environment like this?
We are expecting a credit growth of 8-9%. Of this, I see 13% growth in MSME (micro, small and medium enterprises). Under the Emergency Credit Line Guarantee Scheme, if I have to do 20%, I will be doing something like `3,000 crore. This 20% is guaranteed by the government, the risk weight is zero and there is no capital deployment. In my corporate portfolio, the share of AA and AAA accounts is still going up and I am getting proposals from them for a mix of NCDs (non convertible debentures) and loans. We are mostly doing term loans and there also we would grow around 5%. In housing loans, we will grow around 11-12% because of our very low interest rates. We are looking at customers with the best credit scores so that risk is minimal. I am looking at a NIM (net interest margin) of around 3% so that it is sustainable.