n NPA accounts, too, we have made sufficient provisioning and in Q4, Rs 4,875 crore is our NPAs.Given the demands of the Covid scenario and the possibility of a pick-up in loan growth, Canara Bank will seek board approval to raise up to Rs 8,000 crore in FY21, MD and CEO LV Prabhakar told FE’s Shritama Bose in an interview. The bank has 17% of its loan book under moratorium, he added. Edited excerpts:
What was the reason for the loss widening in Q4?
Before I answer that, I must draw your attention to the other parameters. We have also recovered from written-off accounts Rs 1,470 crore, which is nearly 13% higher. Apart from that, the CRAR (capital to risk weighted assets ratio) has been maintained at 13.65% and gross NPAs (non-performing assets) have been brought down by 62 basis points to 8.21%. PCR has increased by 773 bps to 75.86%.
This has relevance for the loss. This time we made sufficient provisioning for all the expected risks. If you see my staff expenses, I have extra provision of about Rs 1,100 crore. If you see my NPA provisioning, we have set aside about Rs 11,596 crore for the year and for the quarter, we have made about Rs 5,300 crore. Here again, there is bifurcation. For this harmonisation — because Syndicate Bank is getting merged with us — we have made Rs 340 crore extra provisioning. Apart from that, we declared Dewan Housing Finance as fraud in the current quarter, that is, Q1FY21. We have taken the impact in Q4FY20, which is about Rs 497 crore of extra provisions. In NPA accounts, too, we have made sufficient provisioning and in Q4, Rs 4,875 crore is our NPAs. If you take all this, you get the total amount transferred to the provisioning account. We have done this because in the Covid scenario, we want to make our balance sheet strong. So wherever we can, we have proactively made provisioning. Simultaneously, we have taken care that our CRAR did not get affected.
Since the balance sheet has to be strengthened amid the Covid scenario, do you plan to raise capital?
In the first month of Q2, we will have a board meeting, in which we are planning to get an approval for Rs 6,000-8,000 crore of capital. As of now, our capital ratios are adequate. In order to factor in growth and any probable effect (of Covid), we are planning to go for a capital raise. This will be raised in Q3 or Q4 of FY21 in the form of QIP (qualified institutional placement) or maybe AT-I (additional tier-I) bonds —there is a risk there because now nobody wants to subscribe to AT-I bonds after some problems with another bank — or we could go for some kind of tier-II issue. In March 2020, we raised Rs 3,000 crore at 7.12% in tier-II category.
What percentage of your borrowers availed of the moratorium?
In terms of the number of borrowers, it is 19% and in terms of amount it is 17%. Initially, we had given it across the board. After that, we were in touch with them regarding deferment and the benefits of repayment. Some people have preferred to pay back. If you take the MSME (micro, small and medium enterprises) segment, about 38% of the people have opted for it, whereas in retail it is only 5%. Some of them are housing loans and a few for vehicle loans.
What is your assessment of the asset quality impact of Covid-19?
Here I would like to mention two figures. One is the SMA2 (special mention accounts-2) at Rs 2,500 crore or about 0.5% of our book. The second point is that the full amount (under moratorium) is about Rs 1,800 crore, for which we have already made Rs 94-crore provisions. For a bank of my balance sheet size, this amount will not be an issue.
Given that the Insolvency and Bankruptcy Code has been suspended for a year, how are you approaching the recovery piece?
Whatever deferment is available is going to be for accounts which have defaulted after March 25. Before that the cases that came can be taken forward. We can wait for new references for a year because of Covid. We expect that about `3,700 crore will be recovered from NCLT in FY21. The main account expected (to be resolved) is Bhushan Power and Steel.
When do you expect demand recovery to kick in?
With the special schemes, that is, Canara Covid support and the 100% government-guaranteed emergency credit line, in the last three months we have already disbursed about Rs 91,600 crore. In FY21, I see our growth ranging around 7-8%. There will definitely be demand from retail for housing and vehicle loans. With all the support that MSMEs are getting, there should be traction there, too. NBFCs (non-banking financial companies) always need money because they invest further. As soon as the infrastructure side picks up, I think there will be demand from corporates as well.
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