Tackling the rising NPAs is a huge challenge for banks. Poor credit offtake and the rush at branches post-demonetisation have distracted banks from chasing defaulting borrowers and instead focus on immediately pressing issues that customers face at branches. Given that recoveries seem to be weakening a bit, the tendency to write off loans also seems to be on the rise. In an interview with BusinessLine , N Kamakodi, City Union Bank’s CEO, talks on how his bank tackles these issues. Excerpts:

Have non-performing assets seen a quantum jump, say, in the last two-three years, at your bank?

The bank’s gross NPA stands at 2.97 per cent. It has risen from 1.25-1.50 per cent in FY13 to the present high.

What could be the reason for this rise?

Due to the general economic condition and power-related issues, the NPA level started seeing a rise from FY14, when it touched a high of 2.8 per cent.

Thereafter, it had stagnated at around the 2 per cent level. However, our NPA level is not as alarming compared to that of some others in the industry.

The slippage ratio is tending to fall. The total collection under NPA has hovered around ₹1,000 crore.

Have recoveries improved?

Over the last year or two, we registered some improvement. We managed to recover/get at least 50 per cent of the dues, and this was more so because of the collateral cover.

Earlier, the recovery used to be 70-75 per cent of the outstanding loan. We started seeing some improvement in September 2016, but things came to a standstill after the withdrawal of the old ₹500 and ₹1,000 notes from the system.

Which industry vertical was impacted the most?

Real estate and infrastructure sectors, obviously. We did not go for big corporate loans or look at consortium lending.

Our focus is on the trading community and retail lending space and the level of NPAs here is not that high.

How do you foresee business growth in the last quarter of this fiscal?

Overall, things have not been on expected lines. Credit growth during the 12-month period between September 2015 and August 2016 was 16-17 per cent.

The year-on-year growth slipped to 12 per cent as of end-December. We originally expected credit growth at 18 per cent in 2016-17, but hope to close this year at 12-15 per cent growth.

What are your plans on the recovery front?

We have now divided the accounts into two broad categories — less than ₹10 lakh and above ₹10 lakh.

Sarfaesi action is being accelerated on loans above ₹10 lakh. We have scheduled to bring ₹300-400 crore worth of properties for auction in May.

Officers and staff are following up aggressively on over-dues up to ₹10 lakh, and the progress is monitored on a daily basis.

We had planned to accelerate recoveries from October 2016, but could not focus on this because of demonetisation.

The situation does not seem as bad as we feared. There is some progress on the recovery front, but not to the fullest potential yet.

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