‘Worst is over for us in stressed assets’

Canara Bank in the fourth quarter reported sequentially better numbers on asset quality and improved provisions for bad loans. RAKESH SHARMA, managing director and chief executive, spoke to Abhijit Lele on consolidating gains and fortifying the balance sh

The bank has shown a drop in non-performing loans sequentially. Is that an aberration? Will pressure continue in 2017-18? The fall in outstanding non-performing loans is the result of steady efforts at recoveries and prompt action wherever stress was becoming evident. It is not a one-off event. The effective resolution should help to keep a check on asset quality.

Is it fair to say that the bank is over the hump in terms of piling up stressed assets? And it would see a further decline in the bad loans portfolio? The worst is over for stressed assets. The bank will reduce stressed loans (their number and share in the loan portfolio). Yet as a prudent banker, it would keep an eye on stressed assets and not lower its guard.

Last week the government, through an Ordinance, gave the Reserve Bank of India more powers for resolving stressed accounts and triggering action like insolvency proceedings. The RBI also amended rules for Joint Lending Forums (JLF) to aid banks to improve resolution? Both the steps will help to speed up the decision-making process and, as a consequence, bring down the number of bad loans. The bank will now take a firm approach for referring cases of insolvency to the legal forum (National Company Law Tribunal).

Coming to provisioning for bad loans, the bank’s provision coverage ratio (PCR) has shown some improvement? There has been a definite increase in the provisions, whose purpose is to make the balance sheet healthy. Higher provisions have been made in spite of their adverse effects on profits. The bank would like to have a 70 per cent provision coverage ratio (PCR). As for this year, the PCR is expected to improve by two-three percentage points. The share of lowcost deposits has shown a substantial increase in 2017-18 due to demonetisation.