IDBI Bank Sets Up Department To Manage Bad Loans

IDBI Bank Ltd. has created a special department for managing bad loans and monitoring credit after taking a series of hits which include being put “under watch” by RBI and a downgrade by credit rating agency Icra.

Besides, in an attempt to fulfil capital conservation buffer norms, it may raise about Rs 5,000 crore by selling non-core assets in the current fiscal.

“At the head office level, we have set up a separate department what we call it a NPA management and credit monitoring group. It consists of experienced people from both corporate and retail. They are giving focused attention on each case (of NPA),” Pothukuchi Sitaram, executive director, IDBI Bank told reporters in Hyderabad.

Also Read: Fitch Ratings Downgrades IDBI Bank On Deteriorating Finances

He also said they are working with other banks to make some of assets live and put them into the stream.

The Reserve Bank last month put IDBI Bank under watch by initiating Prompt Corrective Action against it, a move that placed various restrictions on the lender including on fresh loans and dividend distribution.

Domestic rating agency Icra downgraded various debt instruments of the state-run bank on account of weak profitability and deteriorating asset quality, which have resulted in erosion of its capital.

It also kept the lender's ratings under watch with negative implications.

Replying to a query, Sitaram said the bank is working on improving its position before going for raising any funds by way of issuing perpetual bonds or selling non-core assets.

He said they are aiming to garner Rs 5,000 crore though the sale of non-core assets, to be taken up between third and fourth quarters of 2017-18.

Also Read: Government Pushes IDBI Bank To Trim Costs But Is It Too Little, Too Late?

The bank, he said, is expected to maintain the Net Interest Income at 2 percent or slightly below to that.

Last year it was between 1.7 percent and 1.8 percent.

IDBI Bank's annual loss for 2016-17 widened to Rs 5,158 crore, as against Rs 3,665 crore in the previous financial year.

It made provisions worth Rs 4,590 crore in the fourth quarter of the last financial year to deal with non-performing assets (NPAs) or bad loans. The provisioning was Rs 3,331 crore in the corresponding quarter of 2015-16.

The gross NPAs almost doubled to 21.25 percent of the gross advances in the fourth quarter of the last financial year, compared to 10.98 percent in the year-ago period. The net NPAs were 13.21 percent against 6.78 percent.