We plan to increase loan book by Rs 10,000 crore in FY22: Murali Ramakrishnan, MD & CEO, South Indian Bank

We thought we could restructure Rs 1,200 crore, but we could only restructure Rs 351 crore. Yes, our provisions were lower for the fourth quarter.

South Indian Bank (SIB) announced a net profit of Rs 6.79 crore in the fourth quarter, against a loss of Rs 143.69 crore in the year-ago period. The asset quality deteriorated, with the GNPA ratio being higher at 6.97%. Murali Ramakrishnan, MD & CEO, speaks to Rajesh Ravi about the performance of the bank and the impact of the pandemic. Excerpts:

SIB reported a profit in Q4 after a loss of Rs 92 crore in Q3. Was it because of lower provisioning ?

At the end of Q3, the gross NPA (including the pro forma) was about 7%. And at the end of the fourth quarter, gross NPA is about 6.9%, as we could make some upgrade. Overall, we were able to reduce the stress book. If you see my guidance at the end of Q2, I had stated that the total stress book would be Rs 2,600 crore. We ended the last quarter with Rs 2,475 crore. But if you look at the composition, NPA, which I thought will be at Rs 1,400 crore ended up at Rs 2,125 crore. We thought we could restructure Rs 1,200 crore, but we could only restructure Rs 351 crore. Yes, our provisions were lower for the fourth quarter.

What is your outlook on slippages this fiscal given that the second wave is seen strong?

It is very difficult to predict . If you look at the yearly average slippage of SIB in the past few years, it is Rs 1,650 crore. Last year, in FY21, the bank had to take an increase of 40% in slippages mainly due to COVID, which on a gross advance of Rs 59,000 crore, led to a slippage ratio of 3.92% for the full year.

I expect that the slippage ratio for FY22 would be 3.3%-3.4%. I think recovery efforts will be also difficult in the coming year. We are looking at this very optimistically, and I believe that we will try to reduce the slippage. As far as guidance, I would say it will be as bad as last fiscal.

Net interest margin declined year-on-year to 2.61%.

There is a huge interest reversal which happened. As soon as the portfolio which we were carrying and accruing income became NPA, we had to reverse it. Even after reversal of interest income, I could maintain the NIM at 2.61% from 2.67%, a year ago. I could do this because of re-pricing and because I could bring down my deposit cost. CASA has improved and my deposit cost has come down. Even though there is a drop in my advances book, still my NII is maintained because of the efficient way I have raised resources. My deposit cost was 9.59% in Q4FY20, and it came down to 8.76% in Q4 of FY21. Cost of funds was 7.97% in the last quarter of FY20 and it came down 7.12% in the last quarter.

What is your outlook regarding advances as it has declined by 9% y-o-y?

The decline has happened due to two things. As a strategy, we wanted to reduce the concentration risk in corporate book. Wherever we have taken very high exposure, we were reducing it. As a result, Rs 100-crore plus corporate exposure has come down to 5% of the total corporate book. As far as new advances are concerned, we should worry about the quality. My strategy is profitability through quality credit. We plan to increase the loan book by Rs 10,000 crore in this fiscal.

Gold loan book has increased 18% y-o-y. How is your slippages in the gold loan portfolio?

We don’t have many slippages in the gold loan portfolio as we were very consciously working with the LTV. In a few cases, we had a high LTV of 95% and we could auction it and we did not lose any money. We have a separate vertical for the product and our endeavour will be to do more retail and agri-gold loan. Currently, our portfolio is more of agri and less of retail. This product is very good and we want to improve the yield. Our yield for retail is 10.5-11 % and agri is 9%. My total gold book is about Rs 9,000 crore out of a total advance book of Rs 59,000 crore.