The bank is mulling the right time for a qualified institutional placement (QIP) and is also keeping the alternative of Tier-II bonds, he says. The priority lies in increasing capital for future requirements as per Basel-III norms, he tells CNBC-TV18. He sees net interest margins (NIMs) to be stable around 2.6 percent in the fiscal.
Also read: 25% of sector's rejigged loans can slip into NPAs: Axis Bk
Below is the edited transcript of his interview to CNBC-TV18.
Q: What led to the increase in gross NPA's this quarter? Where do you see it standing at by the end of this fiscal with the recent capital infusion of Rs 500 crore help?
A: If you see our last one and a half years we could reduce it in all quarters but June 2012. It is because of the economic factors. The 14 basis points (bps) increase is not very significant at this moment.
However, upgradation is also in the pipeline. About Rs 500 crore asset upgradation will be there. I hope that our asset quality will certainly improve in the next quarter.
Q: Can you give us more perspective on by when we could hear something formidable on the QIP?
A: The government has given the in principle approval that Rs 500 crore they will infuse. Presently, the government holding is about 57.89 percent after infusion of this Rs 500 crore. It will reach about 60 percent roughly. So, in that case, we are having the option to go for at least 9 percent dilution as per the present norms.
From September 2013 onwards, Basel-III it is 9.72 percent, but we are just looking at when we should enter for this QIP. We are also keeping the option open for Tier-II bonds also.
So, this will be our priority area to increase our capital for the future requirements as per Basel-III.
Q: NIMs stood at 2.7 percent versus 3.07 percent last year? What led to the dip in the net interest margins and any revision to the guidance which was given for the same as well?
A: This quarter it is at 2.67 percent. So, market is not conducive. Depositors' expectation is that the rate of interest on the deposits should be increased. The lenders' expectation is that present lending rate is very high. So, balancing these two factors is completely under pressure.
However, we will be able to maintain 2.60 percent for the next quarter and in 2013-14 also. At the same time, it is the expectation that may be Indian banks have a little bit higher NIM in comparison with international practice, but we are working on the volume. Certainly in this, if NIM is also reduced, a little bit in basis point we can cover up through this volume increase.
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