Will reduce slippage-recovery gap to bare minimum: S L Bansal

Interview with CMD, Oriental Bank of Commerce

At a time when banks are seeing increasing slippages of bad loans, S L Bansal, chairman and managing director of Oriental Bank of Commerce, is focusing on the bank’s recovery efforts to keep the non-performing assets (NPA) under check. He tells Manojit Saha that the lender will open more branches to garner low cost deposits. Edited excerpts:

The Reserve Bank of India (RBI) has recently taken some steps to squeeze liquidity from the banking system. How do you see this impacting the cost of funds and margin of the bank?
The short-term rates as well as the yields on government bonds moved up sharply immediately after the steps were announced. The rate on one certificate of deposit (CD) is now up by about 125 bps, while the 90-day CD rates were up by 140 bps. So, this increase in cost will naturally affect the margins.

Yield on the 10-year government paper also went past 8 per cent, which was earlier below 7.5 per cent. Earlier, banks were expecting there would be substantial gain from treasury operations. Banks thought the treasury gain would offset the provisioning requirement towards pension and restructured advances, as provisioning requirement was increased for such loans were increased from 3.5 per cent to five per cent from June 1. But now, the treasury gains will not be available and some of the banks may be hit due to mark-to-market provisioning. So, overall the profitability of banks will be affected.

At the beginning of the year, you gave guidance for net interest margin for the current financial year at 2.9 per cent, compared to 2.8 per cent of the previous year. Will there be a revision in that now?

In the first quarter, we have touched NIM (net interest margin) of approximately 2.9 per cent. We were hoping NIM will be 2.9 per cent for FY14. I hope these liquidity steps are temporary. If these steps continue, then we may end the year at 2.85 per cent.

There was a marginal increase in net and gross non NPA in the fourth quarter. The bank expects the ratios to improve by the end of financial year. What steps are you taking to achieve that?
When the economy is not doing well, the slippages will continue. So we are putting more efforts on recovery. You cannot control slippages, but you can make sincere efforts on recovery and upgradation.

In FY12, our slippages were Rs 3,900 crore, while recovery was Rs 1,600 crore. So, the gap between slippages and recovery was Rs 2,300 crore. In FY13, the gap was cut down to Rs 1,200 crore. Our efforts are to reduce the gap to the bare minimum.

The other area in which the bank is behind its peers is the share of low-cost deposits. As on March 31, the share of current and savings account deposit (Casa) of total deposit was 24.5 per cent. How do you plan to increase it?
We are opening more branches, particularly in geographies where we do not have a strong presence, to get more retail deposits. We have opened 375 branches in the past two years. The results will start showing now. This year, we plan to open another 125-150 branches. We plan to improve our Casa ratio to 26 per cent of total deposits by the end of the current financial year.