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Indian Overseas Bank's asset quality, in the third quarter ended December, improved significantly because of recovery of non-performing loans and up-gradation of such accounts, Mr M. Narendra, Chairman and Managing Director, said in a conversation with Business Line .
Gross non-performing asset ratio fell from 3.78 per cent in September 2010 to 3.26 per cent in December.
He said, “More than Rs 800 crore of slipped assets has been recovered. One good thing is that we have 80 per cent of our loans secured by assets; therefore we do not have issue with sale of assets or SARAESI. For every account which has originated as NPA we have a definitive action plan; we have even distributed data to our executives who are following it up. There are procedural issues however — for instance, if we advertise for the auction of the asset, we have to give 60-day notice. By that time the borrower may get a stay order. We have even recovered from the prudentially written-off accounts which amounted to Rs 133 crore. That again goes back directly to the profits. I would have liked to have better performance but it will take time. We plan to auction Rs 330 crore of assets going forward.”
Asked if there were slippages in the restructured asset portfolio, Mr Narendra said that the percentage of such assets has come down. He said, “Of the 6,193 accounts restructured, 3,700 accounts have got upgraded. We brought down restructured asset outstanding from Rs 9,954 crore to Rs 7,577 crore. So far of the slipped 54 accounts, 13 accounts were upgraded by Rs 360 crore in the quarter December 2010. The total amount slipped to NPA was Rs 900 crore. During the last quarter only 3 restructured accounts slipped into NPA.”
Would rising interest rates cause further slippages? Mr Narendra felt that situation was a cause for concern not only for restructured accounts but even for regular loan accounts. However, he pointed out that even for restructured assets, the bank possessed security. If borrowers didn't get credit, they would tap other private equity players or sell some assets. But if they complied with restructured terms, they would get upgraded and get fresh credit, he added.
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