PremiumThe exposure is on the higher side at about ₹3,320 cr. We are watching it, and if provisions need to be taken, we’ll be upfront in doing so, says Sumant Kathpalia, CEO, IndusInd Bank.
Sumant Kathpalia took over as the chief executive officer (CEO) of IndusInd Bank right at the start of the covid-19 pandemic in March 2020. Speaking to Mint, Kathpalia said that over the last one year, the bank has fortified its balance sheet in terms of capital and provisions. On Vodafone Idea, he said the bank will not delay taking the required provisions if such a need arises, and is working with the lenders’ consortium. Edited excerpts:
Where do you stand on the Vodafone Idea exposure?
We took the exposure in 2012 and 2013 and have already disclosed what is our stressed telecom exposure. I think that the exposure is on the higher side and is about ₹3,320 crore. We are watching it, and if there are provisions to be taken, we will be upfront in taking them. It is ₹990 crore of funded exposure and ₹2,330 crore of non-funded exposure. The bank has a 72% provision coverage ratio of and ₹2,050 crore of excess contingent provisions in our books, and I believe we have excess provisions and will be able to manage the funded exposure. We want to wait and see how the situation develops, and if there is a need to take excess provisions, we will definitely take it in this quarter or the coming two quarters and make sure to not carry it over to the next year.
Is there a chance it might end up in an insolvency tribunal?
There is a leader of the consortium, and we are in discussions and will work with it on how to take it forward. The only thing I can say from my interactions with the CEO of Vodafone is that they have about 260 million live customers and it is an operating company, supporting an important digital backbone of the country. What I can say is that we will be prudent in our provisioning and make sure we are well-covered, without waiting for the outcome. I always think of the optimistic side of the story. The matter is with the government, and it will evaluate all options. The government knows every situation and how it is building up, and it will take an appropriate call which is in the best interest of all stakeholders.
What do you think of the Future Group exposure, now that the sale has been further delayed?
We have to wait for the Singapore court order; it is in arbitration right now. Let us see what the order says. One thing I can assure you is whether it is Amazon, or it is Reliance Industries, nobody will want the company to go down. In the next two to three weeks, the order will come through and we will know what is the way forward. But we do not have a very large exposure. Future Group is restructured, and there are no payments due till March 2022.
How did you adapt to the covid-19 crisis immediately after taking over the CEO role, and how do you see the coming months?
The covid-19 pandemic has been a period where fortification of balance sheets happened. If you look at the last 12 months, it was all about making sure one has adequate provisions and capital. That is what we have done, and our capital adequacy ratio is at 17.57%. I think the economy has come back and June was the month when it rebounded; July was better and August is looking much better. Collections are back and what is more important is our three domains of vehicle finance, microfinance, and diamonds are doing well. We are seeing some demand in the corporate segment. The micro, small, and medium enterprise (MSME) segment is also seeing demand come back, and I think the next six to nine months will be very good, provided covid-19 wave three is subdued or lockdowns do not happen the way it happened last time.
Which areas are you seeing credit growth originate from?
In corporate loans, working capital demand is coming in; there are government projects that are happening. That apart, the festive season is about to start, and consumption is improving. Already, if you see last month, we saw very good disbursements in scooter and tractor loans and especially the personal mobility segment. We saw very good disbursements in the light commercial vehicle segment, construction equipment. While microfinance was a little subdued, we are seeing that with the states opening up and collections improving, microfinance demand is coming back.
How have recoveries moved after the second wave?
The second wave had a very sharp and deep impact across the economy, particularly in April and May. Since, there was no moratorium this time, the accounts slipped into non-performing asset (NPA) category. So, there were slippages into NPA and movement out of it as well. June was the month when we saw a little bit of recovery, July was better and August even better. Recoveries are coming back, but there are clients who slipped into NPA and may remain there because they do not have the ability to pay all three instalments at the same time.
shayan.g@livemint.com
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