Diversifying asset-liability is the next phase of growth: Sushil Muhnot

Interview with Chairman & Managing Director, Bank of Maharashtra

Public sector lender Bank of Maharashtra, which has seen 72% decline in net profit for the second quarter on the back of more than industry loan growth, 34%, in 2012-13, is expected to see headwinds on the asset quality front.

It’s newly appointed chairman and managing director of the bank, Sushil Muhnot, who took charge few weeks back, shares his plan to tackle bad loans in an interview with M Saraswathy: Edited excerpts:

 

Your net Non-Performing Assets (NPAs) as a percentage of net advances have risen to 1.76% in the second quarter, as compared to 0.88% last year. What measures are you taking to address this issue?

 

This is a reflection of what is happening in the economy. Monitoring and management of the NPAs will be crucial. We need to see which NPAs are temporary in nature because of the slowdown and if can be rehabilitated. The one which have gone deep, we try to do the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) and get the money out. Our task will be to monitor NPAs to see if it can be upgraded into a standard asset, whether regularisation is possible or one-time settlement. This will be the task for the next several months.

 

We are thinking of coming up with standardised schemes for one-time settlement, wherein standardised process can be given and large number of cases can be covered. We also have a scheme to incentivise our field staff for making recoveries. 

 

Another area is that we need to see that new assets do not fall into NPA, which is another asset quality concern. We will need to regularly monitor the health of these portfolios. 

 

There are is a view Micro Small and Medium Enterprises (MSMEs) do not have adequate lending avenues from banks. Since you were with SIDBI earlier, what steps will you take to boost credit to MSMEs?

 

The entire financial system should approach the MSMEs in a big way. Banks, non-banking finance companies and micro-finance institutions should utilise their entire strength for this segment. Let customer decide whom they want to approach. About 12-15% of our portfolio in the bank is MSME.

 

Banks need to have a standardised product and delivery model. They can also make segment-wise model for MSMEs. One can also make use of end-to-end software for appraisal and rating, similarly to what SIDBI has. Capability of the MSMEs should also be developed so that they are ready for funding. These initiatives can help increase banks' penetration in MSME sector.

 

What are your immediate priorities?

 

Our strength is agriculture and small and medium businesses financing. All we need to do is get into newer areas, tap growing areas and new segments on asset side and liability side. The aim is to diversify the base on asset and liability side. That will be the next phase of growth. 

 

How much of capital have you received from the government? Are you looking to raise additional funds?

 

We have just received Rs 800 crores of capital. We are implementing a set of capital conservation policies. If your asset class is among higher one, you have to provide lesser capital, if you are taking Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) cover, you have to provide for lesser capital. We will now be looking at the many ways that are possible to conserve the capital.

 

Capital raising will depend on the market and market conditions. Presently, we would like to wait for sometime. We will look at two things, utilise the equity that has come in and increase profitability which can be ploughed back. If we are not able to achieve our goals through these two routes, only then the next step of raising capital comes up.