BoI expects to recover 2,500 crores of bad loans per quarter

Bank of India (BoI) has set an ambitious Rs 2,500 crore quarterly recovery target for the current fiscal year as the public sector bank looks to expand after years of stagnation. CEO AK Das said he expects the loan book to grow in double digit 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 as of 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 loan recoveries and restrained fresh slippages.

"Our target is to recover Rs 2500 crore per quarter and allow only Rs 600 cr to slip so that we are in positive territory on NPAs. Until the third week of June, we have done Rs 1900 crore of recoveries so far in the first quarter," Das said.

However, a large part of the recoveries depend on the bank's cases in the National Company Law Tribunal (NCLT) in which Rs 32,000 crore out of 45,000 crore gross NPAs of the bank are awaiting progress. The bank will also sell Rs 2400 cr bad loans to the newly launched National Asset Reconstructuin Co Ltd (NARCL).

BoI is the lead lender to the debt laden Kishore Biyani promoted Future Group that owes lenders more than Rs 25,000 crore. In April it initiated insolvency proceedings against the Future group which is yet to be admitted by the National Company Law Tribunal (NCLT). Das said the bank recognised Rs 600 crore of slippages from the Future Group in the quarter ended June 2022 and has now fully provided for its exposure to the group.

Das said higher recoveries will compliment the bank's growth plans as it looks to expand its loan book with larger bets on the mid cap segment.

"This year our focus is more on mid cap segment where we can do much better. We are envisaging a 8% to 10% loan growth this fiscal which is at the system or just above. We expect to our net interest margin to be as close to 3% as possible and credit cost of max 1% because we have done a lot of proactive provisioning. Housing and retail will continue to to grow faster than the rest," Das said.

He expects corporate loans to grow this year after shrinking last year mainly due to demand from core sectors like steel and cement.

"I expect big bang growth in the construction sector which has forward and backward integrations with as many as 132 sectors which along with the government's push for infrastructure will create a multiplier effect." Das said.

Corporate demand has been muted for the bank as out of the Rs 65,000 cr sanctioned not even half has been utilised.

The bank's board has approved Rs 2500 crore of equity raising but with its capital adequacy at 17% currently, the call to raise more equity will only be taken at the end of September, Das said.