Many bankers believe the current growth dynamics essentially indicate that credit growth is not likely to pick up in sectors like infrastructure and power unless interest rates soften. But due to high inflation, the monetary authority has been cautious in cutting policy rates, which could have pushed down the interest rates in India. Like many of its peers, public sector lender Andhra Bank has also been facing the impact of low credit offtake. VCCircle got into a quick conversation with Andhra Bank chairman & managing director BA Prabhakar on his views regarding what would drive credit growth, his take on microfinance lending and the debt-restructuring market.
Andhra Bank has seen sharp deceleration in credit offtake – from 32.5 per cent growth in Q1 FY12 to just 14.4 per cent in the quarter ended June 2012. Have we seen the bottom or do you see more pain in the system?
We still have a nominal credit growth of 13-14 per cent and we are confident that we should be able to maintain a credit growth of 17-18 per cent (in FY13). Moreover, we have unutilised credit of Rs 4,000 crore, which are loans sanctioned to various projects, and that would contribute to the total loan offtake.
Today, our priority sector lending stands at 37 per cent and it leave us with more room for lending in this segment to reach the mandated 40 per cent of adjusted net bank credit (ANBC). We have to achieve that target and the unmet 3 per cent of ANBC amounts to Rs 1,500-Rs 2,000 crore. So we are working in a situation where we are able to meet our priority sector lending (PSL) target, which means we have to concentrate on agricultural lending, small & medium enterprises (SMEs) and part of the retail lending, which qualifies for PSL.
In retail credit, our loan exposure is more on the loans against recoveries. If you look at housing and auto loans, we are witnessing a growth of 30-50 per cent. We are focusing more on housing loans and some of it can be priority sector lending.
How do you see things panning out for the microfinance industry? Are you planning to lend to microfinance institutions (MFIs) to meet the PSL target? Would you securitise loans from them?
Why should we? We will go for direct lending. We are in all the states except Andhra Pradesh and our exposure to that sector stands at Rs 360 crore. But we may lend to MFIs on a selective basis, depending on their reach, target customers and interest rates.
What about the restructured portfolio? Is it an area of concern?
We have 29 accounts restructured for Rs 751 crore. Essentially, these accounts are referred to the Corporate Debt Restructuring (CDR) cell where restructuring is not done on standalone basis but on a consortium basis. So if you look at the restructured portfolio of other banks and also at us, I would say we are still better off.
In the past, we had a number of accounts restructured, particularly in 2008-09, when we went for the second phase of restructuring. And I think we had covered a large number of SMEs at that time. But that is not the case now. Today, we are more concerned about project and infrastructure loans. As for agri loans, the rainfall in Andhra Pradesh is good so far, compared to other states. It is not a serious problem in AP as the rain deficit is around 25 per cent.
Recovery on bad loans is also fairly good. We will continue to grow our agricultural portfolio as we have done in the past. In fact, our agricultural exposure is more in the coastal districts, which are well irrigated. In this quarter, we are expecting another Rs 300 crore for restructuring.
However, our power sector exposure has gone down. Loans sanctioned to the power sector last year comprised 21 per cent of the total advance, according to March 2012 figures. And the 21 per cent was based on the immediate sanctioned loan amount. So if you are comparing it with the current outstanding as percentage of the total advances, it is only around 14 per cent. It should be compared to the actual outstanding, rather the sanctioned actual fund-based exposure. And we will be cautious towards them.
(Edited by Sanghamitra Mandal)