Corporation Bank plans to trim slippages by 50% to Rs 4000 crore in FY20

Says slippages will not be more than Rs 1,000 cr each quarter in FY20 against Rs 2,000 cr each quarter in FY19

Corporation Bank, which was in February this year taken out of Reserve Bank of India's prompt corrective action (PCA) framework, has said it would reduce slippages to up to Rs 4,000 crore in the financial year ending March 2020. 

Slippages, or standard assets becoming bad loans, were around Rs 2,000 crore every quarter in FY19. This means the bank would reduce slippages by almost 50 per cent. 
 

"Henceforth, the slippages should not be more than Rs 1,000 crore per quarter. It will be only in smaller accounts. As for big-ticket loans, we have covered most of the accounts,” Managing Director and Chief Executive P V Bharathi told Business Standard. 

The public sector bank’s stock closed 2 per cent lower at rs 25 per share on BSE on Monday.

The RBI had placed the lender under PCA framework in December 2017 in view of high non-performing assets (NPAs) and requirement to raise capital. The PCA framework had placed curbs on the bank giving out big-ticket loans and had expected the bank to engage in effective cost controls.  

Gross NPAs of the bank have declined to 15.35 per cent in March 2019 from 17.35 per cent in March 2018. With large provisions made during the year, its net NPA came down to 5.71 per cent in March 2019 from 11.74 per cent a year ago.

The bank’s provision coverage ratio jumped to 83.30 per cent in March 2019 from 63.65 per cent a year ago, on account of higher provisioning in the quarter.
 

“There is no backdating of bad loans (NPAs). We have ensured that, henceforth, we should consistently have net NPAs of below 6 per cent. We have identified accounts on our own also,” Bharati said.

The lender's credit costs, or the amount provided for bad loans as a percentage of loans, spiralled to 8.89 per cent in FY19 against 8.68 per cent in FY18.    

"The credit cost will be coming down. For the past two years, the bank has focused on improving the quality of assets. Going forward, we are going to take very cautious approach on quality of assets that we contract,” she said. 

The credit cost for FY20 is estimated at 2-2.5 per cent, close to the level of 2.65 per cent seen in FY17, another Corporation Bank official said. 

Referring to pace of lending in FY20, she said the bank has taken a conservative growth estimate of 7-9 per cent for this year. 

The loans portfolio grew from Rs 1.19 trillion in March 2018 to Rs 1.21 trillion in March 2019. The bank is spreading across all sectors – especially retail, agriculture and MSME, mid corporate and large corporates. The bank has portfolio of Rs 20,000 crore under each bucket.