Karur Vysya Bank says it plans to raise around Rs 12 billion to fund growth. The bank has been under pressure for some quarters over the level of loans having gone sour.
It has, it says, taken measures to address this, having recognised NPAs worth Rs 200 billion. PR Seshadri, managing director, says they are in transition from this situation, to one of more productivity, efficiency and control of NPAs. “As (these) things are behind us now, we will be able to grow at 15-18 per cent (annually) comfortably,” he said, of the next three years.
The firm would, he said, be raising Tier-I or Tier-II capital of Rs 12 billion to fund the growth. The credit adequacy ratio would increase to 16 per cent from the present 14.5 per cent, enough to back the growth for two years.
Gross NPAs as a proportion of gross advances increased to 7.44 per cent in the June quarter, from 6.56 per cent from the earlier three months. As a result, net profit dropped 69 per cent over a year before, due to higher provisioning and weaker asset quality. Profit for the quarter was Rs 459 million, from nearly Rs 1.5 billion in the same period a year before.
Provision for bad loans for the quarter was Rs 4.22 bn, up seven per cent from the March quarter and 81 per cent from the June quarter of 2017. The provision coverage ratio was unchanged at 56.5 per cent, quarter-on-quarter.
Of the Rs 20 bn in recognised NPAs, the bank is looking at the insolvency resolution law and other legal options, said Seshadri. He ruled out sale of bad loans to asset reconstruction companies.