Once again Bank of Maharashtra has attracted the attention of financial analysts. The bank has reported a 13.44 per cent growth in its standalone profit after tax at Rs 130 crore in the quarter ended September 30, 2020, as against Rs115 crore in the same quarter of the previous fiscal. The growth in profit was on account of higher net interest income, lower bad loan provisioning and reduction in operating expenses. Right now when many banks are struggling to maintain their past performances this is certainly an encouraging performance in such a gloomy situation in which the Indian banking sector is passing through. Surely, it was the result of some bold initiatives.
AS Rajeev, Managing Director & Chief Executive Officer completed two years at the helm of affairs. Right from the first day he has been taking very path-breaking steps and introducing out of box initiatives at Bank of Maharashtra. In his three-decade career having been familiar with corporate credit, international banking, treasury, risk management, finance, accounts & taxation, credit monitoring & supervision, NPA management, planning & development, human resources, vigilance, inspection & audit, corporate governance and cybersecurity; he knows his job well. One of the reasons for his stellar performance is that AS Rajeev is always ready to adopt new technology.
In a freewheeling conversation with Indian Economy & Market, he shares the recently announced quarterly result, outcome of various initiatives and the future plans.
Are you satisfied with the September quarter result?
(Laughs). A banker is never satisfied with his achievements; because the moment a catch comes in he raises his expectations and targets higher. However, to answer your question, I must say that our Q2FY21 quarter was comparatively very good. I am sure that our numbers would be better in the next quarter as compared to the September quarter because we have already made provisioning of more than Rs1,000 crore related to Covid or for any kind of emergency.
That means you don’t foresee any issue raising its head in the next four months?
I think this is a heavily loaded question because we can only prepare ourselves for the future. We can’t foresee the future. But I certainly don’t foresee any issue at least in terms of provisioning till March 31, 2021. During the first half of the current fiscal, our recoveries stood at Rs678 crore and we expect to recover another Rs1,000 crore during the second half.
In August, the Reserve Bank of India had announced one-time restructuring for personal and corporate borrowers affected by Covid-19 related stress. What is the loan amount you have targeted to restructure?
There is no target as such that we have fixed. But yes, we are expecting around Rs1,000 to Rs1,500 crore of our total advances to come up for one-time restructuring. As you are aware, the one-time restructuring is for the borrowers affected by Covid-19 related stress and under the scheme, the resolution has to be invoked by December 31, 2020. The bank’s total advances stood at Rs 1,03,408 crore as on September 30, 2020. So far, the bank has restructured 800 small accounts, including MSMEs, worth Rs 40 crore, under the scheme. There are one or two bigger accounts worth Rs 150-200 crore in the pipeline for restructuring. These are consortium lending accounts and the decision on restructuring will be taken by the consortium.
But earlier this amount was supposed to be between Rs. 3000-4000 crore?
Yes, earlier we had estimated that 15-20 per cent of the total moratorium book will go for restructuring. In rupee term, it was to be around Rs 3,000-4,000 crore to come under one-time restructuring. However, over a period of time the moratorium book itself came down drastically from 27 per cent in March to 15-16 per cent – that is Rs 14,000-15,000 crore as of end August. In the April-September period, our bank settled worth Rs 225-250 crore of accounts under one-time settlement schemes (OTS) and has recovered almost 60 per cent from those accounts. We expect some more recoveries from such accounts before March 31, 2021. In the second half, we expect around Rs 250 crore to Rs300 crore settlement under OTS.
There was a steep reduction in your net NPA in the September quarter. Do you think now it has come under control?
We aimed it having below three per cent. In the September quarter, our gross NPA reduced to 8.81 per cent from 16.86 per cent in the corresponding quarter last year. So that is certainly a big achievement. Net NPA as well declined to 3.30 per cent as against 5.48 per cent in the same quarter of the previous fiscal. However, as I said earlier I would be happy if our gross NPA is below 8 per cent and net NPA lower than three per cent by March-end. The reason is I see an addition of not more than `1000 crore in NPAs each in Q3 and Q4 of the current fiscal.
What you have to say about your deposits and advances?
In the first half, our deposits grew at 12.15 per cent year-on-year and advance at 13 per cent during the first half. I feel in such a situation the numbers are not bad. We expect the same trend in the second half also if we are not able to add a few points more. If I should share our projection then in our conservative view the total deposits may grow at around 12-14 per cent and advances may grow at 14-16 per cent.
You have mentioned that you are going to raise funds. Can you please elaborate about that?
We have received the board approval for raising Rs3,000 crore, which includes Rs2,000 crore through equity and Rs1,000 crore from bonds. We may raise funds through bonds – AT1 and Tier II – during the second half in various tranches. We don’t have AT1 bonds at present so we will raise Rs400-500 crore of such bonds. We will also raise Rs 400-500 crore tier-II bonds if required. With this, our capital adequacy position will be above 14 per cent for the current year. I don’t see the bank will require any capital infusion from the government in this fiscal.
You have also entered into the credit card business. How was the response?
It was awesome. We have a huge base, but it will take time to fully capitalise that. The time is such that not many of our customers are visiting the branches. But in a very short span of time, we were able to capture a significant number. The bank has already issued close to 5,000 cards. We are hopeful and going forward we will expand our base into the segment from the fourth quarter of the current fiscal. As I am confident the progress being made on the Covid vaccine front thankfully normalcy will come back by then.