After making losses continuously for the last 18 quarters, Chennai-headquartered public sector lender Indian Overseas Bank (IOB) on Thursday reported a net profit of Rs 144 crore for the fourth quarter of FY20, paving the way for the bank to come out of the prompt corrective action (PCA) imposed by the RBI some five years ago.
IOB had reported a net loss of Rs 1985 crore in Q4 of the last financial year and a net loss of Rs 6075 crore in the last quarter, sequentially.
Speaking to reporters through a virtual press meet, IOB MD & CEO Karnam Sekar said the bank, which was reporting losses for the last 18 quarters, could turn around this quarter due to several initiatives taken to bring the bank out of PCA.
“The Centre provided us with capital support and with that the required capital adequacy was achieved, thereafter we curbed the NPA level below 6% in the last quarter and efficient recovery and less slippages, we could achieve profit this quarter, thereby fulfilling the last requirement to come out of the PCA,” he said. During Q3, the Centre had sanctioned capital infusion of Rs 4,360 crore.
The bank will write to the RBI after viewing the June quarter results seeking revocation of PCA, he said, adding that lower provisioning and increased recoveries have helped the bank to post the profit, which is sustainable in the long run.
According to him, the bank had made all the provisions in the December quarter and could bring net NPA to less than 6%. The bank’s corporate credit pie has almost exhausted, with all the accounts having been classified. The retail, agriculture and MSM (RAM) portfolios grew to almost 70% of the loan book.
On the NPA management front, the gross NPA of the bank stood at Rs 19,913 crore with ratio of 14.78%, against Rs 33,398 crore with ratio of 21.97%. Total recovery was at Rs 5,386 crore, while the total fresh slippage for the quarter stood at Rs 1,350 crore. Recovery achieved was substantially higher than slippages during the quarter, mainly due to focused priority action on arresting slippages and improving recovery in NPA/OTS accounts.
Net NPA was contained at Rs 6,603 crore with ratio of 5.44 %, against Rs 14,368 crore with a ratio of 10.81%. Provision coverage ratio improved to 86.94% against 71.39%. Total income of the bank stood at Rs 5,537 crore for the quarter as against Rs 5,198 crore, while interest income was at Rs 4,442 crore.The non-interest income stood at Rs 1,095 crore.
The bank had 772 loss-incurring branches in March 2014, which was one of the immediate effects of rapid branch expansion. The continuous follow-up from the administrative layers and efforts taken at the branch level have helped to reduce the number of loss-incurring branches from 772 branches in March 2014 to 115 branches in March 2020. Higher thrust on retail and MSME lending was laid down to improve the yield level, apart from diversification of the risk.
“The bank would continue to focus closely on the loss-incurring branches towards reporting a profitable trend,” he said.
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