What is the outlook on stressed assets given that we have seen a slowdown in fresh slippages?
We are now four years down the line from the peak of NPAs.
NPAs peaked at 10.91% in 2018 and are now at 3.91%. NPAs are coming down not only as a percentage but also in absolute numbers. Big-ticket items of steel and other minerals and mining got resolved. Now whatever remains is in different stages, either being liquidated or in the final stages of sale. There are very few assets which have no visibility on what the resolution is going to be. The recovery on one side and risk management improvement on the other, plus monitoring systems like CRILC (Central Repository of Information on Large Credits) and credit bureaus have overall helped corporate loan recovery.
What about stress in retail?
In retail, the numbers so far vary below 1% but we have to be cognisant that the bulk of the growth in all banks is happening in retail, especially in unsecured loans. A large part of our loans is to the salaried class and that too in the public sector so, to that extent, we are better risk mitigated. But we are also careful, because these people also could be leveraged with loans from informal sources. We are creating models to look at the riskier elements and try to control those before they actually become delinquent. The only thing we have to be careful with is not to dilute standards. As long as that is kept in mind, retail will be fine.
Do you see a change in the recovery process after the experience with the Insolvency and Bankruptcy Code?
IBC has pushed a lot of promoters into negotiating with the banks, which they did not do earlier. So, we are seeing a lot of those Section 12 A (that allows the debtor to withdraw from insolvency proceedings provided 90% of the committee of creditors agrees to it) cases through which 30% of cases have been withdrawn. For public sector banks soft recovery is the weaker piece. Right now, it comes to the recovery vertical at a stage where it is already NPA or even a little later, because the branches try to make some efforts. They make a quick assessment, especially in cases where assets are involved, to see whether there is viable recovery. If they decide that viability is difficult, then they hand it over to the specialist teams. Otherwise we find that before the account becomes empty, or shortly after it becomes NPA, the assets are taken off. We need to actually leverage this 1-3 months of golden period.
Why is the NARCL taking so long to get going?
NARCL is a new organisation. The CEOs of both NARCL and IDRCL took over as recently as June and July. They were still hiring people as recently as last month. The initial list was of legacy cases where banks had not succeeded. So there will be a difference between the value banks expect and what NARCL offers because they have a responsibility to shareholders and the government. We have only seen three bids so far but NARCL will also share future upsides. Banks have provided 100% in most of these cases, and since they have not succeeded so far, so why not try NARCL? We are trying to see if some large assets can be transferred, which can benefit from consolidation. No offer has been made but we are having conversations with NARCL. It is early days, but we are aware that we should move quickly.