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Q&A: T M Bhasin, CMD, Indian Bank

'Not worried on our exposure to power & aviation'

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At a time when the asset quality of public sector banks is under stress due to an uncertain economic environment and rising interest rates, appears confident of keeping a lid on fresh slippages. In an interview with T E Narasimhan and Somasroy Chakraborty, chairman and managing director T M Bhasin says the lender will focus on loan recoveries in the coming quarters. Edited excerpts:

Do you expect the current environment to weaken the quality of your loan portfolio? Will it impact your earnings in the coming quarters?
Our asset quality is one of the best in the industry. Our gross non-performing asset ratio was 1.21 per cent and the net bad loan ratio was 0.69 per cent as of September-end. Our provision coverage ratio is also healthy, at 80 per cent. So, the quality of our balance sheet is strong.

We will ensure our asset quality remains strong in the coming quarters. The focus continues to be on recoveries because it will help us maintain profitability. We have taken several initiatives to boost loan recoveries. We are going for one-time settlements, negotiated settlements and perpetual security realisation. We have dedicated three general managers who will supervise the quality of loans and recovery efforts. We are looking to recover Rs 1,700 crore of loans which have been technically written off. The funds recovered would be ploughed back to the profits and improve our earnings.

What is your loan exposure in the power and aviation sectors? Are you concerned over the quality of lending to these sectors?
We have an exposure of around Rs 9,000 crore in the power sector. Of this, Rs 4,000 crore has been lent to profit-making state electricity boards. The rest are given to new generation power units. But, we have ensured that all the accounts we have financed have AAA-ratings. So, we are not really concerned with our loan exposure in the power sector.

In aviation, Kingfisher Airlines has repaid its loans and none are due. We have given Air India Rs 900 crore of loans. This is still a standard asset and is being serviced on time. In any sector, regular follow-up with the borrowers is essential. If you can identify the overdue within the first 30 days and focus on recovery immediately, the chances are that the account will not slip into the non-performing asset category.

How is the loan demand? Do you think there is further scope for a lending rate rise?
We are located in an area where there are a lot of lending opportunities in the agriculture and (small and medium enterprise) sectors. We are aiming for 21-22 per cent credit growth this year. A further rise in lending rates would depend on liquidity and credit demand. As on date, liquidity is sufficient. The moment the demand for loans goes up and liquidity dries, we will hike our rates.

What is your outlook on net interest margin?
Ours is currently at 3.76 per cent. We expect some moderation in our margin but it will still be around 3.5 per cent. We are concentrating on low-cost current account and savings account deposits and reducing dependence on high-cost deposits.

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