Bank of Maharashtra (BoM) would have posted higher profit in the fourth quarter of FY20, but for the conscious decision to ramp up provisions towards the accounts which opted for relief on loan repayment under the Covid-19 regulatory package, according to AS Rajeev, MD & CEO of the bank.

In an interaction with BusinessLine, he said the business environment will improve from the second quarter onwards.

Rajeev took up the reins of the Pune-headquartered public sector bank in December 2018, when it recorded a whopping net loss of ₹3,764 crore for the quarter. Since he’s been at the helm, the bank has earned a net profit in each of the following five quarters. Excerpts from the interview:

Why has your fourth-quarter net profit come down?

The net profit in the fourth quarter was ₹58 crore (as against ₹72 crore in Q4 FY19). The main reason for this (lower net profit) is that we made more provisions towards borrowers who opted for loan repayment relief under the Covid-19 regulatory package.

Our special mention account (SMA-2: principal or interest overdue between 61 and 90 days) accounts was around ₹702 crore. On this we are supposed to make 5 per cent provision each in the March and June quarters. But we made a consolidated provision of ₹150 crore in the current quarter.

With the moratorium period being extended (up to August 31, 2020) in light of Covid-19 and there being some uncertainty, we made higher provisions. If it is not required in future, we can write back. Otherwise, we would have reported ₹200 crore in net profit. In the current pandemic situation, we decided to take a conservative approach and increase provisioning.

Has there been a shift in the composition of credit growth?

While the credit growth was only 1.52 per cent year-on-year as at end-March 2020, the components of growth have changed. The credit growth has mainly come from the retail (21.3 per cent) and MSME (25.04 per cent) sectors. At the same time, the corporate segment saw a de-growth of 11.54 per cent. Agriculture growth has come down by 4.86 per cent because of the waiver of loans by States, especially in Maharashtra. At the last minute, it (the State) credited ₹2,500-3,000 crore (towards waiver). So, there was a de-growth in agriculture credit. Now, it has started picking up. In the first quarter itself, this (agriculture) portfolio will grow by ₹2,000-3,000 crore.

What is your outlook on business growth?

Now in most places the lockdown has eased and the markets have started opening up. Though there are certain pandemic-related issues, businesses are gradually opening up. There is a pick-up in GECL (Guaranteed Emergency Credit Line) loans for business enterprises and MSMEs. Retail loans have also started picking up. So, things are coming up now. In the current quarter, the growth most probably will be muted. But Q2 (beginning July 1) onwards, I think, things will change. And Q3 onwards, things will definitely change.

How much credit have you sanctioned under GECL?

We have sanctioned around ₹800 crore. We have already released ₹450-500 crore. Our target is to disburse ₹2,500 crore by October-end 2020.

Will you need to raise capital this year?

Now our CRAR (capital to risk weighted assets ratio) is 13.52 per cent. This is at a comfortable level. Of this, tier-I capital is at 10.67 per cent as against the regulatory prescription of 8 per cent (including capital conservation buffer). So, our position is very good. Last year we raised ₹600 crore via the tier-II route. Enough cushion is available for raising capital via tier-II. Tier-I capital is adequate for the next one-two years. Also, internal accrual will happen if a good amount of recovery comes in from bigger accounts and due to profitability in the current year.

Published on June 26, 2020

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