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Mahabaleshwara MS, Managing Director & Chief Executive Officer, Karnataka Bank Ltd, talks about the Q2FY21 numbers, improvement in the asset quality, moratorium book and recovery, gold loan demand and preparation for the festive season and special offer for the bank’s customers among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:  

Q: Bank has been able to keep a steady growth and there is an improvement in net profit and asset quality. How have you managed this growth and steady numbers?

A: Rightly pointed out by you, the first half of the current year was affected by COVID-19 pandemic but fortunately for Karnataka Bank, we have been able to navigate well through the COVID-19 turbulence. And, as a result, the net profit has shown a growth of around 12.71%. This is mainly because of the splendid performance under the operating profit, which has shown a growth of 21.04%. NII that is net interest income also went up by 15.27% and all alone we have been dreaming to take the NIM above 3% and I am happy to share with you that now it stood at 3.08%. Fortunately, the asset quality has further improved, the GNPA has reduced to 3.97% and the net non-performing asset also has come down 2.21%.

The noteworthy feature of our current quarter performance is a significant increase in the PCR (Provision Coverage Ratio), which is at an all-time high of 75.44%. So, you can see a significant improvement in all the fundamental parameters of the bank. And, going forward, even though the COVID-19 impact could continue for some more time as the economy is looking forward and I am confident of sustaining this good show and that is what we are aiming for the third as well as the fourth quarter, a consistent and sustainable performance. 

Q: You have said that there is an improvement in asset quality. Let us know about the recovery that you saw in this quarter and what is expected recovery trends in the coming quarters? Also update us about the present size of your moratorium book and what extra provisioning would be required due to this moratorium?

A: Recovery is almost back on track. You may be aware of the fact that about 51% of my loan book was under moratorium when we declared our June 2020 result. Of course, this moratorium continued up to August and from September onwards there has been good traction, especially in the moratorium book and also the recovery under the other regional accounts. So, this moratorium book has now significantly reduced to 11.40%.

Going forward because this is the recovery, we have made during the September month alone and that trend is continuing and I am confident that by December-end my moratorium book will further shrink to 1% only. OTR is another issue, of course, the Supreme Court is about the give the final judgment and we are also focusing on one-time restructuring and that could be in the range of about 3-4% of our loan book.

But what we have been doing is the advances side also even though the terminal numbers are not that impressive because in the advances side the overall growth has been around 1.62% only. In the subsector, it is mainly the retail under the mid-corporates, retail is of the Rs 5 crore ticket size. There the growth has been impressive at around 8% plus. Whereas in the mid-corporate that is Rs 5 crore to Rs 100 crore ticket size, the growth has been 15%, which is in accordance with the realignment of the advances portfolio that we have been aiming since the last couple of year. As a result, our corporate book has significantly come down. Corporate means Rs 100 crore and above and that has come down by 27%.

So, by and large, all and in general, all this advances portfolio that is a retail and mid-corporate has been supported by the gold loan, which has grown at the rate of 23%, agricultural sector, which has grown at a rate of 22%, MSME has grown at a rate of 17% and of course home loan has grown at the rate of 13%. These are a clear-cut indication that we have been effectively able to navigate the turbulent period of COVID-19. Going forward also I am sure that this will continue to be the growth area for the Karnataka Bank and we will continue to deliver good and consistent results going forward, as well. 

Q: Some reports show the demand for gold loans has increased a lot in South India. You are a south-based bank what is your view on it and what is your exposure in the segment?

A: Gold loan portfolio is going well because a majority of these gold loans are availed by the agricultural farmers. So, the agricultural activity is not affected by the COVID-19 situation, as a result, there has been good traction as far as the gold loan is concerned. But there is a good number of gold loan NBFCs also, so in my bank, we don’t have a very significant gold loan portfolio but around 6% of my total loan book is consisting of a gold loan. As we have a good number of branches in the rural and semi-urban area, so that is naturally catering to the retail requirement of the local farmers, basically. 

Q: Festive season has started so let us know about your preparations and the demand that you are seeing and are you providing some offers for your consumers?

A: Definitely, the festive season has just started and we have also started Festive Dhamaka (Utsav Dhamaka) and there is a very good response, especially for the personal loans and in the home loan portfolio, as well as the car loan portfolio, we have now introduced this digital sanction of personal loans. This is very customer friendly as well as it has a very good filter to select without compromising any of the lending norms.

We can extend the credit facility; it is basically a digital journey and almost all parameters are taken into account for the digital channel only. I have already established a state-of-the-art digital centre of excellence at Bengaluru and through this Karnataka, the bank is, now, emerging as the modern bank covered by the digital technology because my overall total transaction of the bank has also reached a level of around 88% and going forward it will also reach 90%, that is almost at par with any of the new generation private sector banks. So, technology is going to cover the banking in future and we have been preparing well for this for the last three years.

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Not only in extending the banking facility but also in the delivery of loan products, we have taken utmost care. So, technology is going to drive during the festive season this is a technology-driven Festive Dhamaka for Karnataka Bank customers.