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Seshadri also expects recoveries to outpace slippages in the next few quarters. Besides, he believes the slippages in the quarter ending December will be lower than the previous quarter. Going ahead, the ED of Bank of India sees gross NPLs coming down in the next two quarters.
Here is the edited transcript of the interview on CNBC-TV18.
Q: Not just Bank of India, but much more than your bank, other banks, even your bigger rivals have had a huge problem with restructured assets and gross NPLs. Can you take us through how your NPL picture might look in the current quarter? You should have a fairly decent idea and your guesses as to the next quarter?
A: Yes, we did fairly larger slippages in the first two quarters largely because of the way the economy behaved and we were ahead of the curve in terms of NPLs. We have seen a moderation and we have seen some of these NPLs which were not on viability but, on the cash flow constraints that they had. They are in fact responding and we hope that the upgradation and recoveries would outpace the slippages.
I am not saying the slippages have completely stopped, it is a function of the economy. There would be some slippages but, we could see that in the fact that the recoveries and upgradation outpaces the slippage and as far as this and next quarter is concerned, we will definitely see that process continuing.
Q: Slippages in the second quarter were at Rs 2733 crore, you expect it to be lower than that?
A: It is much lower than that.
Q: One of the brokerages had come out with a mid-quarter review of Bank of India and there is an expectation that net interest margins (NIM) might actually improve from that level that you had hit in the first half of FY13 which is at around 2.3 percent. Can you just give us a guidance in terms of how exactly NIMs would pan out in this quarter and for the second half?
A: We have declared results pretty well in the last quarter also. Traditionally, you would see that NIMs would go up on a quarter on quarter basis because the first quarter and second quarter NIMs are subdued.
We would definitely see that the third and fourth quarter NIM should improve for two reasons, one is off-take and pick up and the second which is more important is the moderation in the deposit cost. The liability cost in fact, would have a lag effect and we would see that in the third and fourth quarter, there will be an appreciable contribution on account of a reduction in the cost.
We had actually given an estimation of NIM which would be close to about 2.60 to 2.65 percent as we go along. I think it is happening. The fourth quarter NIM would be closer to the annual average NIM of the bank.
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