We will be able to recover the NPA by the fourth quarter: R Varadarajan, MD, Repco Home
R Varadarajan, MD, Repco Home talks to ET Now about the state of rising NPAs in his business. Edited excerpts:
Describe the asset quality , the gross NPA and the net NPAs they have shot up quite a fair bit and this is, of course, before the regulatory forbearance.
Yes so that the reason both the Reserve Bank and NHB came out with regulatory forbearance because you have to see the profile of our customers also. More than 60 per cent of our customers are non-salaried and particularly the indulge in cash transactions that is the reason there is a temporary setback in the asset quality but taking into account regulatory forbearance there is not much of deterioration. If you see last December, our GNPA was 2.29.
It has marginally increased to 2.65 per cent only now. The moment things get improve during the current quarter as well as the first quarter of the next year, I think that it will be on track. There should be no problem that is what we are expecting that we strongly believe this is only a temporary setback.
Otherwise if you see the other things maintaining spreads of 3 per cent and NIM of more than 4.3 per cent and good improvement in the return on equity network that is from 16.7 per cent last year to 18.1 now and maintaining the return on asset at 2.2, all the numbers are very favourable to us. The only concern is as you rightly said it is the asset quality but we understand this is because of the profile of our customers and also because the setback due to the demonetisation which we believe things should improve now.
From here onwards, would next quarter be a significant stark improvement and if you could give us a range that you are working with in terms of internal targets?
Internally, I cannot give you any guidance. Internally the board has directed us from the level of percent, 2.65 per cent of GNPA, we should bring it down to at least 1.5 per cent by the end of the year that is what we are aiming at now and we are working on it.
And your provisioning will continue to remain lower or would you up your provisioning going forward?
No definitely no. Our policy is we will never write back the provisions so given the provisions as of now on the higher NPA, then we are able to recover the NPA by the fourth quarter, naturally by the additional provision also in the fourth quarter, the provision coverage ratio is bound to go up, at least we expect it should reach a level of 60 per cent to 70 per cent that is what we are aiming at, though I will not be able to give exact number, it should be more than 60 per cent.
Describe the asset quality , the gross NPA and the net NPAs they have shot up quite a fair bit and this is, of course, before the regulatory forbearance.
Yes so that the reason both the Reserve Bank and NHB came out with regulatory forbearance because you have to see the profile of our customers also. More than 60 per cent of our customers are non-salaried and particularly the indulge in cash transactions that is the reason there is a temporary setback in the asset quality but taking into account regulatory forbearance there is not much of deterioration. If you see last December, our GNPA was 2.29.
It has marginally increased to 2.65 per cent only now. The moment things get improve during the current quarter as well as the first quarter of the next year, I think that it will be on track. There should be no problem that is what we are expecting that we strongly believe this is only a temporary setback.
Otherwise if you see the other things maintaining spreads of 3 per cent and NIM of more than 4.3 per cent and good improvement in the return on equity network that is from 16.7 per cent last year to 18.1 now and maintaining the return on asset at 2.2, all the numbers are very favourable to us. The only concern is as you rightly said it is the asset quality but we understand this is because of the profile of our customers and also because the setback due to the demonetisation which we believe things should improve now.
From here onwards, would next quarter be a significant stark improvement and if you could give us a range that you are working with in terms of internal targets?
Internally, I cannot give you any guidance. Internally the board has directed us from the level of percent, 2.65 per cent of GNPA, we should bring it down to at least 1.5 per cent by the end of the year that is what we are aiming at now and we are working on it.
And your provisioning will continue to remain lower or would you up your provisioning going forward?
No definitely no. Our policy is we will never write back the provisions so given the provisions as of now on the higher NPA, then we are able to recover the NPA by the fourth quarter, naturally by the additional provision also in the fourth quarter, the provision coverage ratio is bound to go up, at least we expect it should reach a level of 60 per cent to 70 per cent that is what we are aiming at, though I will not be able to give exact number, it should be more than 60 per cent.
