Two IL&FS Group accounts turn sour

Indian Bank recorded a decline of 66.75% in net profit for the quarter ended September 30 to ₹150.15 crore on the back of higher provisions, a sharp fall in profit from sale of investments, mark-to-market losses and lower recovery from written off accounts. The bank had posted net profit of ₹451.54 crore in the same period of the previous year. Total income grew 5.23% to ₹5,129.17 crore.

Net interest income rose 12.13% to ₹1,730.93 crore while net interest margin climbed 12 basis points to 2.97% from a year earlier. Total provisions rose 12.65% to ₹1,041 crore. Profit on sale of investments fell steeply to ₹4.97 crore from ₹262.22 crore while recovery in written-off accounts slid from ₹66.6 crore to ₹29 crore.

Gross non-performing assets (NPA) increased to 7.16% from 6.67% a year ago, while net NPAs rose 4.23% from 3.41%. The bank’s provision coverage also fell to 60.82% from 65.4%. Fresh slippages of ₹1,624 crore added to the NPA burden, with contributions from projects in infrastructure and road construction.

Asked if the bank was entering a challenging phase given the rise in NPAs and a slump in profit, Padmaja Chunduru, who took over as MD and CEO at the bank on September 21, told a media gathering, “These are challenging times. For 1-2 accounts that are at the National Company Law Tribunal (NCLT) [under the insolvency process], the end is in sight.”

Recoveries expected

She added the bank hoped to recover about ₹250 crore in the December quarter and about ₹600 crore in the quarter ending March in these accounts but that the process ‘could also be delayed.’ She said the bank was also aiming to upgrade the status of loan accounts that had not yet gone to the NCLT.

For greater recovery and upgrades among slipping accounts, the bank intends to set in motion a recovery process. She said “I will head a committee for corporate loan accounts, which will focus on NPA. There will be weekly or fortnightly monitoring of assets. There is nothing that a focussed recovery process cannot achieve. The aim is to arrest slippage.”

She said the bank’s exposure to the beleaguered IL&FS Group was ₹1,809 crore, of which two accounts had turned NPAs.

One of these had been fully provided for and the other, ‘which showed slippage this quarter, has also been provided for.’ Two more group accounts are now on the bank’s watch-list, Ms. Chunduru added.

In the context of the liquidity squeeze among non-banking finance companies, the bank’s advances to NBFCs increased to 12.4% of gross advances, up from 8.55%. “We see no issues with NBFCs. The quality of our portfolio has remained healthy.”

The bank’s capital adequacy at the end of September was 12.73% compared with 31.16% a year earlier. “If you take into account ploughing back of profits and the tier 2 capital the bank had recently raised, the capital adequacy would be 13.24%,” she added.

Advances to the retail, agriculture and MSME segment rose 24.6%, and the segment contributed to about 58.8% of total advances. Deposits from current and savings accounts (Casa) grew 7.29% while term deposits grew faster at 12.37%.

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