Secondly, we made an additional provision of Rs 160 crore. We needed to clean up the legacy portfolio.

South Indian Bank (SIB) is on the path of recovery despite reporting a net loss of Rs 187.06 crore for Q2, says Murali Ramakrishnan, MD & CEO. He tells Rajesh Ravi in an interview that cleaning up the legacy book is the top priority and the book size may go down for a while before bouncing back. Excerpts.

SIB has reported a loss in Q2, compared to a net profit of Rs 65 crore in the year-ago period. How do you review the quarter?

The loss is basically due to two reasons. One, change in accounting due to the RBI direction. Other income came down this quarter, with the depreciation of investment now being shown in other income. Recovery in written-off accounts is now shown in provisions and contingencies instead of other income, and these also led to reduction in other income. Secondly, we made an additional provision of Rs 160 crore. We needed to clean up the legacy portfolio.

What is the outlook for the current quarter and guidance for the fiscal?

I am sticking to my stand that it will be as bad as last year. The total slippages I am expecting for the fiscal is Rs 2,300-2,500 crore. We had slippage of Rs 879 crore in Q1 and Rs 531 crore in Q2. The good news is we have done a good recovery and upgrade in the first half stood at around Rs 600 crore. In the second half, I am expecting recovery of Rs 600-900 crore.

Do you see the total book size coming down this fiscal?

We have done a complete rearrangement and revamping of doing things. And we have seen traction in various businesses since July. We are creating a better bank with a good book. The incremental portfolio is of higher quality. I am addressing the legacy issue and recovering more. My total asset book was Rs 58,309 crore as of September 30, 2021, which came down YoY from Rs 65,349 crore. My book size will depend on the incremental growth of new loans and slippages from my legacy book. From April to October, we lent close to Rs 10,000 crore.

Do you see further growth in the gold loan portfolio?

We did 11% year-on-year growth in gold and I believe we can do more with the revamped structure. My total asset book is Rs 58,309 crore, of which total gold in Q2 was Rs 9,737 crore, compared to Rs 8,500 crore in the year-ago period. Gold loan is 16.7% of the total book, compared to 13% in Q2FY21. I am aspiring it to be 20-25% of the total loan book. There is hardly any NPA in gold for us. We have tied up with a fintech for co-lending and have appointed dedicated officers for the portfolio. The average LTV of the portfolio is 71%.

Are you looking at branch expansion?

The priority is to make branches more productive and accountable. The future of banking is digital and we are looking at consolidating branches. We will open branches in places where we don’t have much presence.

How is the response to the credit card? Any more collaboration with fintech?

We have given 5,000 cards in tie up with FPL. Traction is happening in cards. We are looking at tie-ups with fintech for gold and retail loans.