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PSB: Expects to maintain 'Lowest NPA' benchmark in Q4 as well

During these turbulent times, where most of the banks have been struggling to control surging NPA levels, Punjab and Sind Bank (PSB) is comfortably placed with Gross NPAs at 1.28% as on 31st December, 2011 and expects to see NPA level at less than 1.5% at the end of the  fourth quarter. Mr. G.S. Sachdeva, General Manager Law and Recovery, talks to Debt Recovery Guru about bank’s performance and future outlook.  Mr. Sachdeva has a stint of 36 years with PSB. He has been the part of team which brought about revolutionary transformation in the bank’s performance since 2005. During his career, Mr. Sachdeva headed various branches, governed Dehradun and Chennai zone, where he handled loan portfolios of about 5000 crore. Excerpts:
 
1. What are the biggest NPA exposures for the bank currently (geography, asset class – loans/ Home loans/ Commercial loan etc)?
 
PSB has the distinction of being the lowest NPA level Bank in the industry. Our gross NPA levels to gross advances stands at 1.28% for December 2011.  We are likely to wind up this year at less than 1.50%, which is much below the industry level NPAs.
 
The NPA level is by and large at same level across all the zones of the bank. However, there are a few pockets where NPA levels have surpassed our normal limit. Places such as Kolkata, Jalandhar, Gurdaspur and Mumbai have shown NPAs of around 3%. In Kolkata and Mumbai few large industrial accounts are under stressed condition whereas in other areas accounts of MSME, exports and agriculture have shown a downward trend and have been added to the NPA category. However, the bank has taken special steps to bring down NPA levels in these pockets. 
 
2. PSB has been hailed as a turnaround story in the small bank sector – from receiving a 600 cr bailout to receiving the best small size bank award from KPMG in 2008. What has driven this transformation?
 
The year 2004 was very critical as we had high percentage of NPAs in the industry and we were in loss as well.  At that juncture the Top Management of the bank lead by our previous CMD devised a strategy to focus on recovery.  From there we have turned around from 17% gross NPAs to 1.28%. Bank could post profit of about Rs.100 crore for 2005-06 against loss of about Rs.70 crore in the previous year.
 
Besides, PSB has been focusing on retail lending and CASA Deposit which added to the bottom line of our profits.  Our main presence is in rural and semi urban areas of north India, particularly in Punjab and Haryana where the main thrust is on agricultural lending and retail lending.


3. What processes have been put in place since 2005 and how have they worked in favour of PSB?
 
Our approach has been very conservative while giving loans. The asset quality was always good and mostly backed by collaterals of property.  This proved handy while enforcing our recovery.  We used the tool of SARFAESI Act effectively to bring down NPA level. This not only helped in bringing down NPAs of our bank but added to the profitability of the bank. 
 
We have also introduced liberal OTS (one time settlement) policies based on the guidelines issued by RBI. We have been holding recovery camps as well. Recently, we conducted recovery camps on two Sundays throughout India and were able to collect some 22 crore. We settled about 1800 accounts in these two days.
 
We also introduced short time policy of recovery of technically written off accounts. This policy has been quite successful and we could recover approx. 18-20 crores during a short span of about three months. 
 
4. What is the story since 2008 especially in terms of restructuring and what is your forecast of NPAs for the next few years? 

We have restructured loan accounts of about Rs.4000 crores. Since 2008, our slippage out of restructured account has been minimal. It is just around 1% only. But yes, definitely we apprehend that in the coming years the slippages may be a little more. However, we still believe that we will be able to keep our gross NPA level close to 1.5% only. 

5. How much investment has been there in collection systems, analytics and training last year in your department?
 
Our bank recognises the importance of training and every staff member in all fields of banking including that of recovery management participates in regular training programmes. Most of our training sessions are held in the training college of the bank. 
 
We are surveying and analyzing the market conditions constantly. There is stress in the market condition and therefore likelihood of slippage is more.  We are conscious of that and have taken steps to gear up the recovery process including restructuring of accounts which have shown viability. Since 2008 we have re-structured accounts worth 400 crores. We are also been trying to rehabilitate accounts which are under stress conditions and have shown viability for revival.
 
6. What is the focus for new lending for PSB?
 
We have been lending to sectors such as infrastructure – power and road projects and also to real estate. Since the power sector has shown signs of stress, we are slightly hesitant to venture into it for the time being.

However, we are still financing road projects, hotel projects, real estate and other viable infra structure activities. Our focus remains on lending to retail segment including housing loans, auto loans, personal loans, agriculture, especially in Punjab, which has really seen an upsurge in such loans in the recent times. 


 



 

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