Public sector lender Andhra Bank says it will handhold its weaker borrowers for a couple of quarters as it believes the distress is genuine. In an interview with Shayan Ghosh, Andhra Bank chairman & managing director CVR Rajendran says the bank’s high exposure to the infrastructure sector is the reason for its npa troubles. Excerpts
Why are your NPAs among the highest in the industry?
There is a difference between NPAs of Andhra Bank and those of the industry. There are many power plants that have been completed but are switched off because of unavailability of gas. Even though every bank has a share of power sector NPAs, the exposure of Andhra Bank is highest at 11%.
Our exposure to infrastructure, with reference to total credit, is 20% and most projects have not been finished because of land acquisition problems. In some cases, toll collection is yet to start as some part of that road project has not been completed, even though work on most of the project is over. We are pushing them and promoters are also seeking permission from National Highway Authority of India (NHAI) to start toll collection. So these recoveries will start soon as the assets are capable of revenue generation. We believe our NPAs are a temporary problem.
How do you plan to recover these bad loans? Any increased vigilance plans?
These are all genuine cases wherein we understand promoters cannot do anything unless the project is completed and the fuel supplies have started. At this point, we are hand-holding our NPAs to ensure their projects are completed as soon as the government clears them. Moreover, there are very few takers for these assets. In turn, we are persuading our infrastructure companies to sell not only their non-core assets but also their core assets.
Why did the bank?s NIM drop in the December quarter?
In case of our deposit growth, most of it has been in the form of term deposits, so our Casa ratio had been very low at 23.54% as on December 31. Our cost of deposits have gone up because of that and it happened at a time when there has been low credit growth. Thus, the income on investment and advances has been lower than opportunities available in the market, resulting in the shrinkage of the net interest margin to 2.54% in the December quarter from 3.35 in the year ago period.
What mix of retail and corporate lending would Andhra Bank be comfortable with?
Corporate credit accounts for 52% of our total advances. I would be comfortable at around 40% of corporate lending and retail could be around 20% as our performance in the priority sector has been quite impressive. With respect to agricultural loans, when most banks are unable to reach the target of 18%, we have clocked 20% and NPAs in the segment are lower than the industry.
Based in Andhra Pradesh, how is the Telangana turmoil affecting your business?
Of our total assets and liabilities, about 50-55% is from Andhra Pradesh. Most of our branches have remained closed for many days, affecting the normal business of the bank.
