The banking sector is facing tough times. The rise in non-performing assets (NPAs) is proving a key challenge for the industry at large. Chennai-based Indian Overseas Bank (IOB), too, has been through turbulent times. According to R. Subramaniakumar, MD and CEO of IOB, the stressed situation in the industry would get over in the next two quarters. And, he is confident that the bank will get back its lost glory soon. Excerpts from an interview:
Where is the banking industry headed given the current crisis?
It is testing times for the banking industry. The regulator wanted some stringent measures to be taken, and the government is coming out with so many reforms and policies. When such a transition is taking place, the players who have operated in a different environment earlier have to suddenly adapt to the new one.
There needs to be an institutional re-orientation, and it is taking time. Planning and strategy have to be [switched] quickly when changes are taking place. The restlessness is causing an eruption. This can be contained. And, this is not something which is out of hand.
Have soaring non-performing asset levels shaken the confidence of the general public?
Three decades ago also, banking industry faced a high level of NPAs, at 24%, and it came out of that situation. My belief is the period of extended stress will not last beyond the second quarter of this year. My message to the common man would be to put faith in the banking sector. Also, the public sector bank is a sovereign bank.
Big infrastructure projects have been funded by public sector banks and they have also ensured last-mile connectivity. We will come out of the current problem, and continue in our nation-building exercise.
What makes you believe that the stress would not get extended?
There are some factors for this inference. The NCLT [National Company Law Tribunal] cases are just seeing conclusion. We have one resolved and looking with certainty in two more cases. Other cases are in advanced stages of resolution. Another important factor is that the Insolvency and Bankruptcy Code has brought in a lot of discipline among people because of the fear of losing the asset. Debtor control [has been] transferred to creditor control. Now, they are falling in line. Also, the attitude has changed in the business cycle ... in terms of realising the dues in time now ... when compared to the earlier attitude of, ‘okay I will wait for five months’.
Once big industry heads to recovery, the problems of small and allied industries also will get resolved. So, the fear need not be there and it’s only a question of time.
For IOB, when do you see the recovery reflecting in the numbers?
We are confident of getting over our problem during this year. We want to bring down our net NPA to below double-digit by the end of this year from, 15.33% last year. Our focus is on recovery. We are confident of standing on our own. We have survived 81 years, and are confident of surviving the years to come. What we are facing is a short-term pain. With government support, we will be able to restore our lost glory.
