You have projected lower NPAs. What is the reason behind this projection?
We strengthened the monitoring of loans over the years. Historically, monitoring and recovery were the weak links at public sector banks. We developed early warning systems that help us predict the probability of defaults. One reason why bad loans did not spike across the system after Covid was this monitoring, which is done by most banks now. My stressed book in March 2022 is one-third of March 2021, which means the things we have initiated are working. Because of these systems. going forward. our delinquencies will come down. They went up in the last quarter due to two large accounts Future and Srei. We have provided 58% for Future and 86% for Srei. The full impact of the steps we have taken on delinquencies will be seen in 2022-23.
You have come to the end of your five-year tenure. Has anything changed for public sector banks?
When I started as MD in 2017, most public sector banks were in a confused state. We did not have capital, NPAs were high which required provisions and we started losing market share because of these issues. We made a plan to tackle this problem which stemmed from weak credit underwriting from large infra exposures in 2011-13. The stress was everywhere even in MSME, retail and agriculture. To make credit underwriting stronger, we centralised that function. We segregated the sourcing and processing of loans through a hub-and-spoke model for all loans. When I took over, 50% to 60% of retail loans were above 700 Cibil rating and now it is 83%. All large credit proposals have to be passed by the risk department that has the power to deny them.
Union Bank’s stock price was ₹123 when you came and it has not gone back to that level since. Why do you think investors haven’t valued you?
Investors want continuity, stability and consistency, valuing you for the future. They don’t like any surprises which have been plenty from Covid to NPAs to amalgamation, which is why the market is not ready to give PSBs the valuation we deserve. But I believe all the changes in PSBs have happened and from now onwards we will be consistent. Maybe a consistent performance for one more year will bring valuations to PSBs. My operating profit is ₹21,500 crore and the market cap is ₹27,000 crore, which is rare. So though valuations are not there, it is not like we are not earning. Now operational efficiencies like lower turnaround time and cost-to-income ratio have to come down.
Did the amalgamation impact the recovery of the bank?
We were on track to achieve our targets in 2019-20 when the amalgamation was announced. We had to recalculate our plans because our original plan was a standalone one. But Covid allowed us to smoothen the amalgamation. Now with the increased use of technology, we expect to gain market share. Around 19% of our accounts are now opened through our mobile application and by 2025 we expect it to increase to 50%. PSBs are now giving dividends for the first time since 2016. We will not go away. But we do not get any special privileges. We will have to compete with others on the same terms and regulations and win and at the same time fulfil our social objectives.
If you judge us on only profitability like private sector banks then we may lose out, but we should be judged also on our social contributions.
