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City Union Bank posted stable Q1 numbers with profit growing 11 per cent. Asset quality, however, has worsened marginally. Speaking to BTVI, MD and CEO N Kamakodi says the incremental slippage ratio has come down in Q1. Economic revival and improvement in the property market will help in faster recovery of NPAs. Excerpts:
Asset quality clearly remains a concern for not just your bank but across the fraternity. What is your own assessment and outlook on it?
We are able to see a decrease in the asset-quality pressure, which is getting reflected in the drop of incremental slippage ratio that now looks better. Since we did not have much of exposure to infrastructure and government consortium, we are relatively better off compared with the industry. Things are much better for us and we hope things will improve as we move forward.
You are saying that the pressure on asset quality has reduced. Is it right to say that your bank’s NPAs have peaked? What’s your guidance for NPAs for FY17?
Even though the incremental slippage ratio has significantly come down from the peak, there is one thing, which is not yet happening. If you look at our numbers, for every ₹100 slippage in the past, we have recovered about ₹70-75, mainly because almost 98 per cent of our loan book is fully collateralised with immovable collaterals, and the recovery used to happen through immovable collaterals. Since the economy is not performing well and there is a significant drop in the way property market is behaving, the liquidation of collaterals is taking more time than what it used to.
The NPA numbers will start decreasing once you start seeing the initial phases of economic recovery and with the improvement in the property market. But what is very clear is that the incremental slippage ratio has come down by almost 50-60 per cent. And may be in the next few quarters, it will be getting back to the best of the cycle when we had 0.25-0.5 percentage of slippages. But the absolute number will start coming down, when the recovery of the NPAs will pick up when there is an improvement in the property market. We are probably few quarters away from that point.
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