Published on Wed, Nov 02, 2011 at 16:27 | Source : CNBC-TV18
Completing its 100% migration to system-based NPA recognition, in an interview to CNBC-TV18, R Ramachandran, chairman and managing director of Andhra Bank says its is one of the reasons why the bank's NPAs have gone up in Q2.
Post the Q2 results declared today, he says the bank's MFI exposure is at Rs 250 crore and he has not seen any delinquencies in MFI loans. Further, he says, "in the long-term NIMs (net interest margins) will be stabilising at 3.25% and 3.5%."
Q: Asset quality seems to be a bit of problem right now and gross NPAs have definitely increased, is there any particular sector that is giving you trouble at the moment, the agricultural sector even on the power side?
A: We have declared results after doing 100% system generated NPA, we have gone through that and our software has picked up more than one lakh thirty thousand accounts below one lakh category.
As a result of which particularly our agricultural sector, the NPAs have gone up by more than Rs 500 crore in this particular quarter. Hence, it is one of the reasons why our NPAs have gone up.
Going forward, more than 50% of this can be recovered before the end of this financial year because these are not accounts that are likely to slip further. It is just that the system has captured it and traditionally Andhra Bank has been position to affect good recoveries out of its agricultural advances. We are pretty confident that substantial portion of it will be recovered, unless and until there are external reasons.
Q: Would it be safe to say that the transition to system based recognition is now done and you don't have a significant rise in the NPAs in the coming quarter?
A: Yes certainly, we have done it 100%, to its full effect and going forward, from next quarter onwards, you will not see any increase in advances on account of any deficiency in capturing through the system. We expect this to pan out to a level by which we will only see increase in recovery and improvement as far as reduction in NPAs is concerned.
Q: Could you tell us the exposure that Andhra Bank has to the MFI and power sector and has there been any fresh slippage in this account on both these two?
A: Our advances to MFIs is very nominal, it is just around Rs 250 crore in terms of out standings and it has come down from Rs 290 crore to Rs 250 crore and the exposure is not high and we have not seen any delinquency in that. A few accounts went in for restructuring, we anticipate things to fall in line and we don't anticipate any stress on account of that.
As far as power is concerned there has to been any case for restructuring of any of the advances. Our power outstanding were around Rs 9187 crore to power sector, which is 12.33% of the total advances.
Q: Some of your statements say that you see a pressure of about 30-35 basis points in terms of NIMs pressure in Q3, where do you se this pressure coming from is it to do with savings rate and its deregulation cost will not be able to be passed on or is there any other pressure?
A: Partly, it is to do with savings rate, partly also to do with the fact that reprising of all the earlier deposits that are taking place now. So, traditionally wherever we have taken deposits for a long-term for 2-3 years, which is at a lower rate of 6.5-7-7.5 % than today, we offer for one year at an interest rate of 9.4%.
We have been in a position to more or less maintain the NIM between 3.8 and 3.9 for three to four quarters. If you look at our NIM for September 2010 it was around 3.91, so we have been able to maintain it at this level. However, going forward, it will be difficult because one is the reprising.
Secondly, the fact that eventually we have to be competitive; when there is a deregulation in savings bank and going by the present market trends there may be certainly an upward pressure for us to revise the savings account rates shortly and when we revise it, it will certainly go up. I will not be able to quantify it, till a decision is taken but it will certainly have an impact and pressure on our NIMs.
Q: Do you see the long-term NIMs stabilising at 3.5%?
A: It will be between 3.2 - 3.5%. We don't expect it to go to 3.2%, it should be between 3.25% and 3.5%.
Q: The exposure of over Rs 9000 crore to the power sector is quite high and we have already seen one of the banks Punjab National Bank going in for restructuring of those loans, even if you have not done it in this quarter is there a likelihood that in the coming quarter you see reason to restructure the exposure to power sector?
A: Firstly, we have not received any request for restructuring from any of our borrowers in the power sector. Secondly, most of the projects for which we have given advances, are all in the implementation stage, so it is too early to say whether they will require restructuring at all.
There can be some stress but it has not come to a level where borrowers have come and asked for a restructuring, therefore, it is too premature for me to say whether there will be a restructuring at all. I do not anticipate any restructuring to happen for at least one quarter.
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