Bank of India News: Bank of India expects to recover 2,500 crore bad debts per quarter

(BoI) has set an ambitious quarterly recovery target of Rs 2,500 crore for the current financial year as the public sector bank seeks to expand after years of stagnation. CEO AK Das said he expects the loan portfolio to grow in double digits this year and hopes to keep slippages at an average of Rs 600 crore per quarter.

The public sector bank reported gross NPAs at 9.98% of loans in March 2022, down from 10.46% in the quarter ended December. Das said he expects the bank’s NPA to be below 8% in March 2023 due to a combination of improving bad debt collections and further limited slippages.

“Our target is to recoup Rs 2,500 crore per quarter and only let Rs 600 crore slip so that we are in positive territory on NPAs. now in the first quarter,” Das said.

However, much of the recoveries hinge on the bank’s cases before the National Company Law Tribunal (NCLT) in which Rs 32,000 crore out of the bank’s gross NPA 45,000 crore awaits progress. The bank will also sell bad debts of Rs 2400 cr to the new National Asset Reconstructuin Co Ltd (NARCL).

The BoI is the main lender to the Future Group, promoted by debt-laden Kishore Biyani, who owes lenders more than Rs 25,000 crore. In April, it initiated insolvency proceedings against the Future group which has not yet been admitted by the National Company Law Tribunal (NCLT). Das said the bank had recognized Rs 600 crore of Future Group slippages in the quarter ended June 2022 and had now fully forecasted its exposure to the group.

Das said higher recoveries will complement the bank’s growth plans as it seeks to expand its loan book with bigger bets in the mid-cap segment.

“This year we are focusing more on the mid cap segment where we can do much better. We are looking at 8% to 10% loan growth this fiscal year which is at system level or just above We expect our net interest margin to be as close to 3% as possible and a cost of credit of no more than 1% because we have done a lot of proactive provisioning Housing and retail will continue to grow faster than others,” Das said.

He expects business lending to rise this year after falling last year, driven mainly by demand from key sectors like steel and cement.

“I expect skyrocketing growth in the construction sector which has backward and forward integrations with no less than 132 sectors which together with the government push for infrastructure will create a multiplier effect.” says Das.

Business demand has been reduced for the bank because of the sanctioned Rs 65,000 cr, not even half has been used.

The bank’s board has approved a capital increase of Rs 2,500 crore, but with its capital adequacy at 17% currently, the call to raise more capital will only be taken at the end of September , said Das.

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