We hope to see a turnaround this fiscal: IOB chief

Chennai-headquartered Indian Overseas Bank (IOB) was brought under the prompt corrective action (PCA) programme by the RBI from September 2015 after the bank reported the highest non-performing assets (NPAs). Following this, a comprehensive turnaround strategy was initiated and is showing results. R Subramaniakumar, Managing Director & Chief Executive Officer of IOB, explains the various initiatives and their outcomes in an interview to BusinessLine . Excerpts:

What are the initiatives taken to address NPAs accounted for by corporates?

About 52 per cent of NPAs are in the corporate segment with majority of them in the consortium accounts. We have an exposure in 10 of the 12 large NPA accounts recently announced by the RBI for resolution under reference to NCLT. The 10 accounts constitute one-fifth (about 20 per cent) of our NPAs. Here we see a timely resolution which is expected to take place — in 180 days or 270 days. Most of these accounts are asset-based. So, we are confident of recovery. Further, having identified these accounts as NPAs, we hold sufficient provisions for their accounts.

One of our biggest NPA recovery initiatives here is the ‘Out Reach’ programme, under which branch teams are made to visit NPA account-holders. We have about five lakh plus accounts in the small NPA segment. Our branch managers have so far reached out to four lakh plus accounts in about four months. This has helped us reduce the retail NPA share to 3.87 per cent from 7 per cent. Similarly, NPAs in the SME segment has fallen to 17 per cent from 23 per cent. For the first time, we used the ‘skip tracing’ method on social media to locate the loan defaulters (some debtors still update their social media networking sites such as Facebook and give their current details after moving to different places. The IOB recovery team tracks these sites to hunt down the loan defaulters). We expect better results in the coming quarters.

What are you doing on the loan portfolio side?

Our asset profile is getting rebalanced. Corporates used to account for 53-54 per cent of the loan book. Our rebalancing started with reducing the high-risk-weighted assets to that of the medium- and low-risk-weighted assets. In Q4 of 2016-17, we were able to reduce the corporate share to 48 per cent. This was achieved by accelerating the branch level asset growth strategy.

We started strengthening our traditionally strong area, the mid-corporate segment. We brought back the focus and this has created new relationships that had vanished during our transition period.

Have you been able to contain incremental slippages?

In the January-March 2016 quarter, we had slippages of about ₹22,000 crore. A year later, it came down about ₹12,000 crore. Also, our recovery in the March quarter of 2016-17 was ₹8,710 crore as against ₹5,800 crore in the year-ago period. So, recovery is going northwards, while slippages are moving southwards. Our aim is to increase the recovery by 25 per cent during this year. Similarly, we plan to arrest the slippages by 30 per cent. We have embarked on a multi-pronged approach to achieve the same.

What initiatives are being taken to improve customer service?

I should admit that we were not doing well on the ATM front. Our ATM uptime was about 60 per cent and we focused on maximising it. Now, it has reached about 78 per cent. We have installed about 400 CDMs (cash deposit machines), which will do both cash acceptance and dispensing.

We have also installed passbook printing kiosks in 700 places. Each machine will be able to meet the requirements of 100 plus customers daily. Otherwise, we would need to deploy at least one person in every branch for this.

Have you taken up any branch or ATM rationalisation exercise?

We identified the branches that are unviable to operate. In the March quarter, we closed 21 branches. We have identified 31 branches for closure during this quarter. This is an ongoing exercise, which will see closure of about 100 branches. But customers’ convenience is kept in mind during this work. Actually, closure means merging them with the nearest ones. There are certain branches that are hardly 50 metres apart.

We have also identified ATMs where transactions are few. We have repositioned them or deployed them at places where there is need for more machines. One hundred and seventy eight such ATMs have been repositioned.

Is the worst behind for IOB?

I can’t say that. It is not a standalone issue as we are taking the impact of the banking sector. But the rate of worsening has been addressed. The entire team of 30,000 IOBians have started looking in a direction where we are confident of reaching the goal of turnaround.

We are in the phase of consolidation and beginning of the leveraging stage. We are able to address all our problems and start opening up the fronts where we will be able to make better profit and leveraging will come in the subsequent quarters. We hope to see a turnaround in this fiscal.

COMMENT NOW