Mahabaleshwara MS, Managing Director & Chief Executive Officer, Karnataka Bank Ltd, talks about the Q3FY21 numbers, improvement in the asset quality, expected restructuring and recoveries among others during a candid chat with Swati Khandelwal, Zee Business.

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Q: The bank has posted strong results for the third quarter of the ongoing financial year. What led to this growth and going forward, do you think that the momentum will continue?

A: Even though it was a tough quarter, the results are really quite encouraging. This is mainly because of the cautious business approach adopted by the bank, well ahead of the time, I should say. It was centred around the theme of conserve, consolidate and emerge stronger. We all predicted that COVID-19 would have an adverse impact on the economy and that's why we have been really cautious in our business approach. This is a reason why at the beginning itself we have confined our expenditure, we focused more on our core business and further strengthening the fundamentals. This is quite evident from the net profit, not only during this quarter - this quarter it has gone up by around 10% - but during the first two quarters also you have seen the consistency with which the Karnataka Bank is performing. And supported by the able increase in the net interest margin also this has gone up to a high of 3.26% and for the nine-month period, it is at 3.07%. All alone, we have been dreaming to have a NIM of above 3% and that has become a reality during the current financial year. On top of it, our provision coverage ratio (PCR) has also improved to 80.51% and that is also a new high for the Karnataka Bank. Capital adequacy ratio is also 13.83%, very comfortable and going forward, we will definitely cross 14%. There was certain apprehension about the NPA, so we had even taken into account, what would have been the NPA had there not been the restraining order of the honourable Supreme Court. Now, it is at 3.16%, otherwise, it would have been well under 3.95%. Our last year GNPA was 4.99%. In all I should say that the asset quality has not deteriorated, rather it has improved. So, all the fundamentals have further strengthened, even our CASA has gone up to 30.07% and the digital transaction has gone up to the level of  88.77%. Going forward, this will be our endeavour to further strengthen all these parameters and emerge as the bank of future for the Karnataka Bank.

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Q: What kind of restructuring and recoveries are expected in the coming quarters as cases are now moving to NCLT and there is an action? Also, what is the room of improvement at the bank if the third-quarter numbers are considered as the base? 

A: We are focusing on consistent performance and that is the centre of all our activities. We are also closely watching the restructuring book. Last time also, I had indicated that the OTR (one-time restructuring) book as per the regulators prescription could be in the range of 2-4% of my loan book. What we have done while finalizing the quarterly results of the current quarter is that OTR identified accounts, which is around 1000 as of now and we have already made the required provision upfront. And also, for this probable NPA of around Rs 427 crore, what we have identified under the Performa NPA. For that also we have made provision. So, the future provision requirement is already absolved and it is around Rs 150 crore of an additional provision that we have made, which is parked as the provision of the standard advance. Another thing is the major advances, which were showing stress, we have been able to address it properly. We have also reduced our exposure considerably under the large corporate advances. Now, we are more focusing on retail and mid-corporate. So, all the major shock, which were there have already absolved. I am sure that going forward there will be more and more good news than the bad news.