Can you throw some more light on the slippages during the last quarter?
A large part of the slippages have come from the ‘watch list’. If you look at the total gross slippages in the quarter, they were worth Rs 3,638 crore. Of this, the corporate segment constituted for Rs 2,911 crore, out of which, ‘watch list’ slippages were worth Rs 2,680 crore. So, watch list slippages made up 92% of the slippages from the corporate lending segment.
We have said in the past that over a two-year period, we expect about 60% of the ‘watch list’ to slip into NPAs. What we saw this quarter was roughly 10% slip. We have also mentioned in the past that we expect a little bit of skew towards the first quarter of FY17. So, what is happening right now is in line with what our expectation was about how the watch list was going to resolve itself.
Of what’s remaining in the ‘watch list’, 26% is accounted for by iron & steel, power constitutes 27%, while textile constitutes 7%.
Is there any guidance that you can give us when it comes to recoveries?
The operating environment for some of the underlying businesses has improved a tad in the last few months. However, it is too early to start thinking about large scale improvement in their underlying finances, and hence, our recovery assumptions for the full year hasn’t materially changed.
Which sectors are contributing the most to your corporate loan growth?
Corporate credit at an overall industry level continues to remain sluggish. However, we continue to see good and attractive opportunities, largely coming from the refinance side. We are seeing well-rated corporates coming for refinance, which is driving most of our growth. This quarter was another quarter in which refinance-led growth was the story in corporate credit. Over 80% of our new sanctions to
corporates this quarter was to clients rated A or better.
In terms of sectors, it was a quarter in which corporate credit grew from multiple sectors. We saw good growth coming from sectors like telecom, pharmaceuticals and oil & gas.
Advances grew 21% (y-o-y) at a time when slippages have been so high. Can you talk about the strategy behind it?
Our thinking is that a certain part of our book has been clearly identified and firewalled by us. It’s the watch list. We know there are likely to be problems there and they need to be dealt in a particular way. However, the rest of the bank needs to continue to focus on generating growth. This is and continues to be an environment in which competitive intensity is not very high in certain sectors. Banks having a good capital position need to be able to leverage that and grab growth.