There is a marked improvement in your asset quality at the gross level and even at net level, NPAs have come down both sequentially and on a year-on-year basis. Are you comfortable with your asset quality? When do you see the bad loans getting transferred? Have you fully provided for the concerns going forward and will credit cost be negligible going forward?
No, no absolutely. We are having a coverage of 80% on our loan side which are adequately provided and we have seen the recoveries which in FY21 and FY22. Out of those recoveries, there was a positive effect on our P&L to the extent of 40% of the recovery that shows that we have been able to recover more than the provisions which we have made on those loans. This journey will continue and we are seeing very good traction. Like last time, we are in the process of forming an ARC structure. We are quite hopeful that we would be able to do it within this quarter and then the entire bad loans of the bank would be transferred in a very transparent manner to this ARC.
Where do you see the NIM trajectory going forward? Do you expect that to translate into profitability and lead ROAs higher in FY23? What do you expect the trend tobe over medium term?
This year we have exited at a ROA of 40 bps. We are quite confident that we would be able to achieve ROA of 75 bps at least in the FY23 and if some of the recoveries happens as per our expectations, then we may be in a position to touch ROA of 1% but definitely in medium term, ROA of 1-1.5% is achievable for us. We are seeing this in terms of business growth and recoveries, The bank is well poised to achieve that ROA.
What is the overview on the broad income demography of the individuals that you are dispersing retail loans to? How comfortable are you with the quality of the book?
The products that we are dispersing on the retail side are business loans, personal loans, vehicle loans and also home loans. The home loan segment was missing earlier and now we are growing very well in that segment. Overall, on the retail side, our focus is always in terms of if we can lend more to the salaried class and where the credit scores are good and that has also been reflected in our NPA numbers on the retail side and also the overdue book on retail.