Kotak Mahindra Bank on Monday reported a 36.6% year-on-year rise in its net profit for the December quarter. Sequentially, the bank’s net profit grew 11.4%. In an interaction with reporters, joint managing director Dipak Gupta talks about sectoral performance, asset quality issues, market environment and possible opportunities going ahead.
Which sectors have performed well and which have lagged?
Well, tractor (segment) has been practically flat. On the contrary, commercial vehicles have grown pretty well for a change, and cars have done pretty well. Business banking i.e. SME lending has grown too.
There are some concerns over asset quality? Where is this coming from? Is it again from the ING Vysya acquisition?
This is what we have been mentioning, you know, right from the merger onward. This is not some additional pressure which one is really seeing. This is what we had budgeted for right at the beginning.
How is the “bad bank” formed to manage bad assets arising out of the ING Vysya acquisition shaping up? Have you seen any recovery? Also, how much of the total provisioning is for loans in this book?
Well, bulk of this provisioning is essentially towards that. Even in previous quarters, most of the provisioning was for loans from that part of loans. Don’t call it a “bad bank”; its a bad book of hopefully a good bank. Recoveries have been slower than what we had thought of initially. It has been slower because, I think, the marketplace is reasonably stressed and some of these accounts have been problems for the entire banking system per se. We have a very small role to play, a very small exposure really. And, yes, sale of assets has been difficult. Liquidation is not as great as one would have hoped for. I think it will take longer than what we have expected.
So when you say longer, how much longer is it going to take?
Let me give you an example. Let’s say you have got a DRT (debt recovery tribunal) order or a high court order for sale. The asset is already in your possession and now you’ve got to sell it. But for sale to happen, you need buyers willing to give you an adequate price. That part is not happening. That is in line with the general sluggish market scenario.
So do you now see an opportunity for corporate lending to pick up?
That definitely is an opportunity. But you still have to be prudent because the environment is something that calls for caution.