New Delhi: IOB Chairman Karnam Sekar says they will approach RBI to withdraw PCA (prompt corrective action) once making net profits and want to observe for more quarter to prove that it is sustainable.
The Bank has recently introduced higher disbursement targets and business plans for retail, Agri, MSMEs and others if there is need for capital on the regulatory front.
"We hope to make net profit from this quarter (January-March) onwards and then we will approach the government and RBI for PCA withdrawal. We have a below 6 per cent net NPA already and we want to observe it for more than a quarter to prove that it is sustainable," Sekar told IANS in an interview.
the bank's Net NPA fell to 5.81 per cent as of December 2019 quarter and reported a standalone loss of Rs 6,075.49 crore for the quarter ended December 31. The Bank posted a loss of Rs 346.02 crore in the same period last year.
He said the bank does not currently need either regulatory or growth capital but may tap the market if there is a need.
"We may fall short slightly on CRAR including the counter cyclical buffer. After we hopefully make profits in this quarter capital adequacy ratio will be comfortable. We don't need growth capital also since our plans are not very aggressive immediately. If at all we need, we will go for Tier 1 or Tier 2 capital from the market", the CEO said.
Capital to Risk (Weighted) Assets Ratio (CRAR) of a bank's capital to its risk. IOB has been in PCA for the last 5 years, the longest stay for any commercial bank under PCA because of heavy exposure in corporate loans bringing huge NPAs. Government so far has infused about Rs 8000 crore capital. He said the bank is trying to bring corporate slippage to zero and RAM portfolio slippage to 2 per cent from the 4 percent earlier, then additional provisioning will reduce. IOB's NPA's provision coverage ratio is 86 percent now and net NPA is Rs 7,000 crore in absolute amount.
On its net profit possibilities, the CEO said, "We are making operating profit in the range of Rs 800 crore each quarter. We are recovering about Rs 200 crore each quarter from written-off accounts, which directly adds to the operating profit which is Rs 3000 crore operating profit annually".
As per IOB's strategy to post profit, he said, "Last several years the bank had to make huge provisions on credit which has led to an accumulated provision of Rs 43,000 crore. Not that the entire provision needed to be written off or to be absorbed, as and when we recover NPAs some of them will be ploughed back which will be a straight addition to operating profit".
