Repayments not an issue, things are back to normal: Karur Vysya Bank CEO

In a Q&A, B Ramesh Babu dwells on the recovery from Covid, implementation of government schemes and the roadmap for the future

While heavy rains have created havoc in Tamil Nadu, B Ramesh Babu, Managing Director and chief executive officer of Karur Vysya Bank (KVB) believes that floods will have no major impact on the banking sector. In an exclusive interview with Shine Jacob, Babu talks about the recovery from Covid, implementation of government schemes and future roadmap. Edited Excerpts:

1. How do you see the impact of the current disruptions caused by heavy rains on your business, especially agriculture and small enterprises?

Our crop loan exposure in severely affected districts such as Chennai, Tiruvallur, Chengalpet, and Kanchipuram is less than 5 per cent of the total farm portfolio. In spite of rains, crop loss has been minimal in Tamil Nadu, but there is only delay in planting the second season crop.

Our bank has a diversified portfolio with about 60 per cent of agri advances from Tamil Nadu. Of this 60 per cent, more than 40 per cent is lent for agri-allied activities like poultry and dairy. As far as our agri portfolio is concerned, there will not be any major issues on account of rains. For small businesses, there has been a temporary setback and business as usual will happen from next week onwards.

Covid was a bigger threat and despite all the related issues, post-pandemic we have improved our overall collection efficiency to 98 per cent. In the September quarter, our net slippages were negative. Which means, our recoveries were more than all the slippages that came in the quarter. So, we don’t foresee any major issue as far as repayment is concerned, as things are back to normal.

2. You have disbursed Rs 2,132 crore so far under the Emergency Credit Line Guarantee Scheme (ECLGS) scheme. Do you see an element of risk attached to it?

The ECLGS initiative taken by the government is truly a timely boon for borrowers. Had this not been there, many units would have struggled. I don’t see such much risk attached to this portfolio, as it enables beneficiaries to avert the possible risk of pandemic-driven failure. Repayment is happening in all the cases. During the first wave, there were uncertainties about future cash-flows, hence several borrowers availed financing under this scheme and it has helped them during the second wave.

3. Are you seeing a recovery in the MSME sector?

We have a lot of exposure in textiles and this sector is doing very well because of the China factor too. The textile sector benefitted even during the pandemic and many units approached us for expansion of their existing facilities, as they see the current demand sustaining. Other downstream industries connected to textiles have also flourished. The rest of the industries are also back to normal. We were initially expecting a flood of requests for restructuring. Finally, when we looked at it, we could lend at less than 3 per cent of our loan book under Covid restructuring. We extended support to many units by giving a holiday period for repayment, so that they can return to normalcy. In respect of our borrowers, I can say the impact is low even on the MSME sector and many could manage the shock well.

4. What are your assumptions about slippages in OTR 2.0 (one time restructuring) and where exactly is the exposure coming now?

As far as the corporates (above Rs 15 crore exposure) are concerned, we have only a handful of companies who have opted for restructuring and thus we have not faced any issues regarding corporates. Rest of the requests have come from smaller players below Rs 15 crore exposures and many of them are into trading and manufacturing. Our restructuring pipeline for this quarter is around Rs 250 crore that we are examining and out of that some of them may not be doable. During September quarter too, the flow of requests have also come down for restructuring. The requests for GECL (Guaranteed Emergency Credit Line) have also come down because borrowers have got cash-flows from their business operations.

In terms of retail, a major portion of this exposure has come from home loan borrowers or Loan against property (LAP) customers. We have an unsecured portfolio of personal loans of around Rs 500 crore, which is less than1 per cent of our total loan book and very few cases have come for restructuring requests and likewise few cases under agricultural sector too. By the end of December, we expect our restructuring book may be around 3.5 per cent of our portfolio.

5. There was a 46 per cent rise in your jewel loan portfolio during the quarter. Do you expect the trend to continue?

Last year, people were in dire necessity for money to meet unforeseen expenditure they have availed Gold loans. This year, people are relatively comfortable and thus will not take out their jewels for availing a Gold loan, unless it is an absolute necessity. This year also we have a growth of 5-6 per cent under this portfolio. Last year, we could not do any other business due to lockdowns and thus our entire energy was on this segment. Our current exposure to Gold Loans is around 22 per cent of the total loan book and we will try to take it to 25 per cent of our total loan book.

6. Your number of branches have come down from 2017-18. What is your strategy regarding penetration and expansion?

Last four years, we have invested a lot in digital. Thus, the need for having a branch has come down to some extent. We have entered into partnerships with Fintechs and NBFCs for co-lending partnerships. However, to improve our branch-presence, during the year we are planning to open 15 branches.

We are also appointing business correspondents in locations where we do not have a branch-presence. We are planning to increase the number of business correspondents from 140 now to around 500 to start with during this financial year.