IOB expects resolution of NPAs worth Rs 18,000 cr in 2nd half of FY21

State-owned Indian Overseas Bank (IOB) expects resolution of about Rs 18,000 crore of non-performing assets (NPAs) under the insolvency and bankruptcy process during the second half of the current fiscal, a move that will boost its bottomline.

Besides, the Chennai-based bank is hoping to come out of the prompt corrective action (PCA) framework of the Reserve Bank of India (RBI) next fiscal.

"We are hoping resolution of NPA cases worth about Rs 18,000 crore pending before NCLT (National Company Law Tribunal) in the second half...In the last quarter, resolution of some big account at NCLT will further strengthen the balance sheet," IOB Managing Director P P Sengupta told PTI.

On the back of resolution and pick up in advances, the bank aims to bring down the gross NPAs below 10 per cent mark by March.

During the second quarter, the bank registered a substantial improvement in asset quality as gross non-performing assets (NPAs) plunged to 13.04 per cent of gross advances from 20 per cent at the end of September 2019.

In value terms, gross NPAs or bad loans fell to Rs 17,659.63 crore as against Rs 28,673.95 crore a year ago. Net NPAs reduced to 4.30 per cent (Rs 5,290.60 crore) from 9.84 per cent (Rs 12,507.97 crore) a year ago.

On the PCA, Sengupta said, "We are not in a hurry...we don't want that hurriedly we are out of PCA and later we come across the same issue. We want to consolidate and rest assured how we can withstand the COVID-19 crisis. After March quarter result probably we may think of approaching RBI for considering removal of the bank from the PCA framework."

In addition to IOB, Central Bank of India, UCO Bank and IDBI Bank are under the PCA framework in the public sector banking space.

Last year, the RBI removed five banks Bank of India, Bank of Maharashtra, Oriental Bank of Commerce, Allahabad Bank and Corporation Bank from the PCA framework in two phases after capital support from the government that resulted in improvement in their financial parameters.

Earlier this year, Oriental Bank of Commerce was merged with PNB while Allahabad Bank and Corporation Bank amalgamated with Indian Bank and Union Bank of India respectively.

As far as credit growth is concerned, he said the focus will be on retail, agriculture and MSME but not on corporate side.

He said the effort is to improve the net interest margin (NIM) to 2.5 per cent by March.

With regard to one-time restructuring, Sengupta said, "We are not anticipating major activity in the large corporate book. We have 26 eligible cases. Of these, we have indication from 3-4 cases. Others have indicated that they will be able to regularise the account."

In the MSME space, he said the bank is anticipating close to Rs 4,000 crore restructuring may happen while there is not much demand from the retail sector.

The RBI in August permitted banks to go for one-time restructuring of loans that are facing stress due to the COVID-19 crisis with a view to mitigating risks to financial stability.