interview | Shikha sharma Economy

‘Hostile takeover difficult when people are the assets’

Current regulations don’t permit it, says the chief of Axis Bank, in the context of recent reports that a private bank was interested in the lender

Shikha Sharma, managing director and chief executive officer of Axis Bank — the third-largest private sector lender —said that credit costs will come down in the current financial year and normalcy could return in the next fiscal on the back of several initiatives by the government and Reserve Bank of India to address corporate distress. Exerpts from an interview:

RBI has asked banks to initiate bankruptcy proceedings for 12 large defaulters. What is the way forward? How will this solve the stressed asset problem?

We have to look at it as a continuum on how the government, the RBI and banks are working together to solve some of this issues. A slew of decisions have been taken by the government and the RBI. Whereever policy intervention is required, the government is very proactive, in sectors like steel, infrastructure etc.

Even after all of that, there may be a situation where the projects fall under two categories — one, the project is viable but there is a cash flow problem so they need a resolution such as restructuring of the debt, getting fresh equity; or, there can be projects where it is best to change the promoter. Or, there may a case where it needs to go for liquidation.

There are different solutions for different situations. When there is a consortium of a large number of banks, you need to take timely decisions. That is the crux of the issue. First, the banks have to appoint a resolution professional. Even after it goes to NCLT, there may be an opportunity to do the resolution; and, if resolution doesn’t happen, then you go for liquidation. Going to NCLT does not mean that it is going into liquidation.

The issue is that resolution exercise has been slow as banks in a consortium are often unable to reach consensus.

RBI is pushing the decision forward. Sometimes, since there are multiple banks, some are fearful of taking a decision because of whatever the consequences may be. I think the RBI is nudging [them] and it is a good place to start.

The Internal Advisory Committee had identified 500 accounts of which 12 are referred to Insolvency and Bankruptcy Code, 2016 (IBC). Banks have to resolve the remaining cases in six months. Else, they will also be referred to IBC. Isn’t six months a short time?

That is why I said that this is a continuum. It you look at it, the RBI has picked up the large ones where banks have exposure of more than ₹5,000 crore which are NPAs. And they are saying, ‘Go to NCLT.’ And for the rest, they are urging banks to try and resolve [the issue]. I am sure they will wait and see how the entire process pans out and change pace appropriately.

Axis Bank’s gross NPA ratio had declined sequentially in the Jan-March quarter but slippages remained high, at more than ₹4,000 crore. Do you think slippages continue to remain high?

Some of these NPA slippages are partly because of what is happening in these sectors. It is largely coming from infrastructure, steel sectors... Until resolution happens in these sectors, we can still see higher levels of slippages. But we have guided that the credit cost for the year will be lower than the credit cost of last year. Between last year and this year, we should be heading back to a ‘normalcy’ kind of year from FY19 onward.

There were some media reports on a private sector bank planning to acquire Axis Bank. Your comments?

That’s a dead story, we have nothing more to add on it.

Your view on hostile takeovers? Do you think the regulator should allow such a move?

The current regulation has no place for hostile takeovers. But more generically, I think when the asset is people-oriented, it becomes more difficult to derive value out of a hostile takeover.

Axis Bank has provided the payments solution for the mass transit systems in Kochi and Bangalore. What was the objective?

Essentially, we are solving the ticket collection problem for the Kochi and Bangalore mass transit system providers and solving the payments problem of commuters of these two cities.

Axis Bank has launched a contact-less smart card, in association with Bengaluru Metropilitan Transport Corp., which will enable commuters to utilise the balance for transit as well as retail payments.

The interesting thing about the Kochi Metro is that they are the first to opt for digitisation of transit, based on open mobility standards. The KMRL Axis Bank ‘Kochi1’ Card is an automated contact-less card. It comes with a mobile app. If source and destination stations are entered, it computes the fare, and you will get the ticket on your mobile. You can scan it and catch your train.

It’s an open loop card so you can use it anywhere in Kochi, where you can get lots of offers.

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Printable version | Jun 1, 2020 11:35:54 AM |

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