Mumbai-headquartered Dena Bank, which was placed under the prompt corrective action (PCA) framework by the Reserve Bank of India in June 2016 in view of high net non-performing assets (NPAs) and negative return of assets (RoA), is working on improving its performance and profitability.

In an interview to BusinessLine , Chairman and Managing Director Ashwani Kumar, said the focus of the public sector bank is on recovery (of bad loans, which stood at 17.37 per cent of gross advances as of June-end 2017) and stepping up loans to the retail, agriculture, and micro, small and medium enterprise sectors. Besides, the emphasis is on containing slippages so that the provisioning burden is less.

Kumar said the bank is expected to see a turnaround by June 2018 on the back of the aforementioned measures. Excerpts:

How did your bank deal with swirling rumours about it is getting merged with another bank after it was placed under the PCA?

I sent a letter to all our branches (around 1,800) to be delivered to customers, emphasising that PCA is not going to affect the normal functioning of the bank and they don’t have to worry about their deposits. They are as secure as they were earlier. Our bank has been around for almost eight decades. So customers should not get carried away by misinformed communication in social media. We are working on improving our performance and profitability, and hope to receive customers’ continued patronage.

What steps are you taking to improve the bank’s performance?

There are four parameters — capital, asset quality, profitability and leverage — which, if breached, would place a bank under the PCA. We had breached two parameters — one was that net NPAs had crossed a certain threshold limit (greater than or equal to 9 per cent but less than 12 per cent), and another was losses (negative return on assets of 0.75 in FY16 and 0.67 in FY17). The reason for the losses was mainly on account of NPA provisioning.

We are working aggressively on NPA reduction. And once we are able to contain slippages and provisioning, I think things will start improving. We have recovery teams — 10 people are functioning from the head office contacting all borrowers who owe the bank over ₹5 lakh; each zone has a recovery team, which reports on a daily basis to me. Every month, we are holding a mega recovery camp. In the past couple of months, we were able to reduce the NPAs by about ₹120 crore... This quarter (April-June) particularly, we were expecting a slippage of about ₹1,300 crore; the slippages were actually ₹950 crore. Consequently, the provisioning came down substantially; so the net loss (at ₹133 crore) was also less vis-a-vis the year-ago period (₹279 crore). So we are working in the direction of coming out of the PCA.

Besides the (12 large stressed) accounts that the RBI had asked banks to proceed against under the Insolvency and Bankruptcy Code (IBC) (of these the bank has an exposure to nine accounts amounting to ₹2,660 crore), on our own we have initiated action against 16-17 accounts, where we are the sole lenders, under the IBC. The amounts involved in these accounts are not very big. We are trying to sell assets aggressively under Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act).

By when do you expect the bank to make a turnaround?

I cannot give any timeline as such, but we should be back in the black next financial year; maybe by June 2018.

What is your bank’s capital-raising plan?

We have signed a three-year turnaround plan with the government. There are various components to that — right from containment of NPAs, to improving asset quality, improving retail portfolio, reducing risk-weighted assets, etc. As per the plan, we envisage a capital requirement of about ₹1,500-1,600 crore this year. Out of this, we have taken permission from the board for a QIP (qualified institutional placement) of up to ₹500 crore. By October, we should be able to mobilise the resources through the QIP. Capital-raising is a priority.

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