Private lender IDBI Bank expects less than 14% of its total loans to remain in the non-performing loan category by March next year, down from 19.14% in FY22, due to higher collections and transfers to the wrong bank.
“Compared to our goal of ₹4,000 crore, we had recoveries of ₹5,000 crore in FY22. My target is for the bank’s gross non-performing assets (NPA) ratio to be below 14% by March 2023, and by March 2024 it should be below 10%,” Rakesh told reporters on Monday. Sharma, managing director of IDBI Bank.
Sharma said these projections take into account the bank’s decision to avoid the technical write-off route to clean up the balance sheet. He added that if the bank decided to resort to technical cancellations of fully provisioned loans, its gross NPA ratio would fall below 2%.
The Reserve Bank of India (RBI) defines technical or prudential write-off as the amount of non-performing loans outstanding on branch books but which have been written off – fully or partially – at head office level.
“The turnaround really happened,” Sharma said.
As of March last year, IDBI Bank is no longer subject to the strict lending restrictions imposed by the Reserve Bank of India (RBI) under the regulator’s Prompt Corrective Action (PCA) in May 2017.
“The balance sheet has started to grow again after a gap of almost four years. There has been a growth in advances from businesses and retailers. Now we look forward to further improving the finances,” Sharma said, adding that the bank is targeting loan growth of 10-12% in FY23.
Sharma said the bank’s net NPA was around 18% of its net advances about four years ago, but has fallen to 1.27% now.
“Gross NPA could not be reduced because we were unable to complete write-offs and also because some of the assets we had thought of transferring to the National Asset Reconstruction Co. Ltd (NARCL) n could not happen. But in the current year it will happen and then we can drive down the raw level of NPA,” he added.
Banks missed the March 31 deadline to transfer the first tranche of toxic assets to the newly created bad bank due to procedural delays, mint reported last month. IDBI Bank plans to transfer a total of ₹11,000 to 12,000 crores in advances to NARCL, whose live accounts will be around ₹7,000 to 8,000 crores, Sharma said last July.
“We expected NARCL to start taking on loans from January, but somehow that might not happen by March. In a new organization, this delay of two to three months is completely normal. I am sure that in the current year – first or second quarter – NARCL will start taking over the loans,” Sharma said.
The bank announced Monday a net profit of ₹691 crores, up 35% from the same period last year, due to lower provisions. Its reported net interest income was 25% year-over-year (yoy) at ₹2,421 crores and other income decreased by 24% to ₹844 crores.
“Almost four years, we were under PCA and the balance sheet was decreasing. Our growth mainly started in the second half of FY22,” said Sharma.
Throughout next year, Sharma said, IDBI Bank will benefit from increased business and is optimistic that revenues will improve.