Most private banks have declared higher slippages in the first quarter. Could you give us an overview of how your slippages were and what happened within the MSME and retail books?
As far as slippages are concerned, we have given the guidance earlier of the quarter that our slippages will be around Rs 4,000 crore. So, we worked on those lines and all my staff members who are connected with the recovery, who are actively engaged with the borrowers, and because of that the result is the slippages are only Rs 4,200 crore, which is well within our estimations. As far as retail is concerned, our NPA is only 1.5%. Here two things have helped us. One thing is timely assistance to these people, retail as well as MSME, and the second one is restructuring also helped a lot in assessing these people, at the same time controlling the NPAs.
Could you give us an account of what your MSME and retail slippage percentage was as opposed to the overall slippage pie?
Out of this Rs 4,250 crore, about 55% to 58% is from MSME and 18% to 20% is it from retail. The rest is from other sectors.
Do you foresee challenges when it comes to recoveries or did you face them for the months of April as well as May?
Well, the lockdown was there when the business was closed and cash flows were not there for what you call MSME borrowers, as well as other people. Yes, it was a challenge in the month of April and May. However, in June our collection efficiency increased to 91% and the RBI resolution to framework has helped a lot in assessing these people and also in controlling the NPAs by restructuring the loans, wherever genuinely it is required.
The best part of this restructuring, as far as our bank is concerned, is under MSME. We have restructured about Rs 3,300 crore and retail about Rs 7,600 crore and total amount is over Rs 13,200 crore. After restructuring the people have started paying the instalments and already out of this, we have recovered about Rs 64 crore, out of which 35 crore is advance payment. Basically, we feel that since the cash flows are there with the people, they have started repaying it. And well, it helped them to continue their business. That is a secret of controlling what you call the impact of the COVID on the asset book.
Let us talk about the possibility of the bad bank creation. What is the stake in the NARC and also the accounts that you would look at being transferred there?
This is National Asset Reconstruction Company Ltd. and it is NARC. We are going to have about 12% of our share in that one in equity and we are working on the accounts which can be transferred to this ARC with the approval of the board. I think going forward we will be in a position to crystallise the figure which is still under progress.
Your operating profit is up substantially. Do you think you would be able to maintain these margins over the medium and long term?
In the last five quarters, every quarter, quarter on quarter, we are strengthening the balance sheet and we are controlling the expenses, and we are increasing the fee-based income because of which today our operating profit is at Rs 5,751 crore YoY; there is a growth of 34%. Going forward we are confident that this trend will continue because now the contribution is there from each and every branch of our bank, not from a few pockets. This will help going forward in improving our operating profit and also increasing the non-interest income.
The NBFC in infra space accounts for about 26%. Are you seeing an impact of the second wave on that book and what are the risks that you are foreseeing in this pocket in the medium term?
As far as my loan book is concerned, corporate is about 45% and in the coming one or two quarters we do not see any stress as far as infrastructure and NBFC accounts are concerned because accounts have already passed through the stage. Now they are out of that impact of COVID.
One more thing under NBFCs, our exposure is about 95% to A, AA and AAA accounts. So, naturally the risk is almost minimised. In the corporate also in A and AA and AAA accounts our exposure is about 67% wherever rating is there and in BBB it is about 14%. I think as far as corporate book is concerned, we are better placed.
What is the strategy you are employing with provisions? Are you keeping any floating COVID-specific provisions and is there any reason why you would be doing that?
As far as provisions are concerned, as on date all the accounts are amply provided. In that sense if you see my provision coverage ratio, it is 81.18%. So far as provision is concerned, I am in a better position as on date compared to one year earlier when the provision coverage ratio was only 70%. And even the provision which I made as on date – about Rs 845 crore – I have made for that restructuring.
Rs 500 crore was there earlier and other provisioning where we require is income tax. This time about Rs 845 core provision we have made for income tax since the operating profit has increased significantly. So as on date, I do not see any floating provision required because the coverage ratio has already crossed 81%.
Are you looking to monetise any of your subsidiaries in the current fiscal?
Monetisation of subsidiaries is an idea that is always put in. However, as on date I feel that my subsidiaries have lot of potential and going forward this potential is going to increase significantly. I think when we find that it is an appropriate time then we will be taking the approval of the board.
A lot of businesses are changing how they operate. Are you seeing any significant changes or planning anything drastic in the digital and technology side of things?
The score of the banks regarding the digital ranking among 44 banks, Canara Bank stands at 6 from the top. It is 6th in the top and we could achieve this because we give a lot of focus and a lot of investment in IT sector. Going forward we are encouraging our customers to do more and more transactions through digital mode and we are encouraging our staff to handhold the customers to use the digital mode, especially the mobile banking, internet banking and also the debit cards and the credit cards to a larger extent, in which we have achieved a significant success. But still, the efforts are on.