We have used Gandhigiri to shame defaulters: PNB's Usha Ananthasubramanian

Punjab National Bank (PNB) has made a name for itself in recovery of bad loan dues. Usha Ananthasubramanian, managing director and chief executive officer of the government-owned lender, talks to Dilasha Seth and Indivjal Dhasmana on the details, and allied matters. Edited excerpts:

How has PNB managed a good show on non-performing assets (NPAs), while other (public sector) banks are struggling?

There are large assets that are consortium-driven, while smaller assets are solely bank-driven. The major success behind robust recovery performance has come from our war room. It is a small set of six-seven people that monitor (NPA) accounts. They help branches and zones on how to crack an account and follow up. It is relentless. We also have a very strong group on WhatsApp for recoveries, in which circles and zones post by 9 pm every day about recovery.

Ideally, we are looking at a recovery of Rs 34 crore a day. We name and shame defaulters. Gandhigiri has also worked very well for us — our people go to the defaulter and shame him with rosebuds. The entire neighbourhood comes to know about them. The group has done excellent work.

We have also been looking at assets that can be put up for sale to asset reconstruction companies. Another approach is to put on sale a lot of properties (held as collateral).

The government is expected to shortly announce an NPA policy. Your broad expectation?

Today, the haircut (term for a writeoff by a bank on its loan) is an unknown animal. You can take 20, 30 or 40 per cent. There needs to be some clarity on this. Otherwise, the tools of the Reserve Bank (RBI) are available — SDR, S4A, others. Clarity should come on haircuts.

How much haircut do you take when it comes to recovering NPAs?

We do not go below the book dues on the day of NPA (declaration). We try to recover that. All are provided accounts; so, there is a write-back happening from the profits and the minimum is the book dues.

Is there progress on public sector units (PSUs) taking over the management of stressed assets in their respective sectors, with PSBs (government-owned banks) finding it tough to find promoters?

Nothing has happened yet. Each PSU has its own problem — SAIL for steel, NHPC for hydropower, Cochin Shipyard for ships, NTPC for power. They have their own manpower issues and other problems; nothing much has moved forward.

After taking on NPAs, how do you plan to increase credit?

The economy will take time to recover. We ought to see some good growth in credit. It means inching towards double-digit (growth), not more than that. There is a lot of MSME (micro, small and medium enterprises) activity, not in manufacturing but in services. PNB has a very strong agriculture background, with 66 per cent of our branches in rural and semi-rural areas. Today, agriculture is panning out very differently and that helps us. In addition, there is demand in retail (meaning individuals' accounts).

With banks flush on liquidity after demonetisation, what is the way to suck out the excess? Do you believe the RBI will announce a tool in this regard in its policy review?

Everyone is talking about the (proposed) standing deposit facility (SDF). It will become one more tool in the hands of the RBI. Whether it is going to unleash this or not might reflect in the policy. Earlier, this was managed but this is an opportunity to look at a new instrument.

What is your expectation from the review (this week) on policy rates?

It will most likely be a pause.

After consolidation in State Bank of India, do you see any more synergies for consolidation in the banking space? Where do you find your bank in this regard?

One part of consolidating is when your DNA is the same; it is easier to do. Consolidation with respect to a smaller bank merging with a larger one does not make much sense. Basically, the resultant entity should be large enough to give it a size.

What non-core assets might you offload?

We have very few non-core assets to offload. We stand invested in PNB Housing, for instance, a listed company. After the lock-in period that ends in November, it is one good asset we plan to sell. Then, there is UTI Mutual Fund, for which we have to decide the next step forward. We also have PNB Gilts, the only listed primary dealer in India. There is enough room to offload. In PNB Metlife, we are on a shareholders’ agreement, so it does not work right away.

Will you sell a seven per cent stake in PNB Housing Finance?

We will only be able to take a call after November, looking at the valuation and requirement, on whether we need to sell five, seven or eight per cent.

With respect to UTI, are there plans to sell stake to SBI or a foreign partner?

All of us are equal shareholders. So, it will be a collective call of all stakeholders. We are not here to divest or give it to anyone. We will come to a common understanding and then take a call, on whether it will be an IPO (initial public offer of equity) or shedding a part of it.

With one state announcing farm loan waiver and a few others contemplating, do you think banks will be impact in some ways?

As long as we get back the money from government it is alright. Generally it leads to a laid back attitude when you need to repay the loan. So people wait for these waivers. But people must realise that the last waiver came after 18 years in 2009. The culture should be to repay regularly.  (After this, take online)

SBI has cut the base rate. Will PNB also follow suit?

This month we have not cut, may be going forward we will as the cost of resources is the dominant factor in construction of marginal cost of funds based lending rate (MCLR).  So as the cost comes down, it will be passed on. We have to see what the policy has in store and how resources pan out during the month. And at the end of the month we will take a call.

Has  your cost come down because of demonetisatoin?

We all have definitely got a lot of CASA deposits. Dependence on high cost deposits is thoroughly gone. Fortunately we do not focus on high cost deposits. Our strength comes from CASA. PNB always runs at over 40%, and demonetization took us up to 47%, even if you take  the withdrawals. But there has also been replenishment of deposits. It is not only one sided. People thought everyone will withdraw. But people are also putting in money. So we should hover around 41-42%.

How much capital infusion are you looking at this fiscal?

It all depends on how the economy picks up. It is picks up, then we will require Rs 3000-4000 crore.

WilI all of it come from the government? 

We cannot say that right now. May be part from the government and part we will have to manage ourselves. We cannot depend 100% on government. We will have to look at ways.

What are the ways that you could explore?

One could be selling non core assets. Secondly, may be we can go abroad and raise medium term notes (MTNs).

Banks have a concern over the requirement to have multiple registration under GST. What is your take?

That is a concern because there are  over 30 states and UTs and it is going to be very cumbersome. There was a representation made for single registration. Multiple registration will have its own complexities. You may be a resident of Delhi, but your card is issued in Mumbai and you use it in Shillong, so who will get how much. We will need clarity on these counts.

What is the war-room target for NPA recovery this fiscal?

We had targeted Rs 20,000 crore last year. We are yet to set it for the current fiscal.

This approach to recovery is for small borrowers only or also for corporate?

It will not work out this way in case of corporate as lending to them is essentially through a consortium. This type of loan follow up works for sole bank. There have been great results. The bank has evolved itself in the recovery job. We have done naming and shaming for defaulters in newspapers, impounded passports and update the wilful defaulters list on our website every two-three months. And let me tell you that very big and influential people have been asked to surrender their passport. Besides, we have a concept of ‘Manaadi’-beating of drums in north India—to spread information when a property is put up for sale.

Has SARFAESI Act amendments helped the bank to recover NPAs?

It is going to help us as earlier everyone would go to debt recovery tribunals and get stay after stay. But now there are set timelines. That is going to help us, which is the essence of the amendment.

You are critical of the Prevention of Corruption Act  in the current form as it does not distinguish between erroneous and deliberate decisions. Amendments are in the parliament, will it change the life for bankers? 

Bona fide decisions, which go wrong due to economic or industrial scenario, must be exempted. Making mistake is one part but what is the misconduct in making the mistake is to be considered.

But has SDR worked with you in the sense of finding investors for the beleaguered companies?

In some cases it has certainly happened, where the intent of investor is to step in and revive the company. There are a lot of funds interested, but they are also very choosy about assets- returns and how quick they can get returns. There is definitely interest today. We have had one company and investors came from Hong Kong and Dubai. They are running the company very well and promoter has hardly any stake. But then, I wont be able to quote too many cases like this one.