Allahabad Bank, one of the 11 state-run banks put under the RBI’s Prompt Corrective Action (PCA) framework, hopes to exit from it by 2020. Having burnt its fingers lending to large corporates, the bank is re-positioning itself as a “Retail Bank” and is expanding its presence in retail lending, agriculture and MSME segments. Currently, the bank’s loan book is split 60:40, 60 per cent comprising large industries, trade services, commercial real estate, while the rest includes retail, agri and MSMEs.
Of the five parameters considered under PCA, the bank hopes to be out of the framework in four by 2019. However, its 2019 return on assets is estimated to be negative at 1.92, and falls under the third threshold prescribed in PCA. But, even that is likely to turn positive by 2020, the bank said in a road map submitted to the Parliamentary Standing Committee in August, reviewed by Morning Standard. The other four parameters -- net NPAs, CRAR, CET 1 equity and leverage ratio -- are likely to fare better by the end of 2019.
“We will primarily be a “Retail Bank” deepening our presence in our heartland of operations by facilitating inclusive growth and focusing on resource mobilisation through domestic savings, and also providing wealth management solutions besides expanding on retail lending covering personal, agriculture and MSME segments. Based on the above projects, we are confident of coming out of PCA,” the bank explained.
As on March, 2018, its total credit stood at `1.6 lakh crore, of which over half (`89,732 crore) comprised non-priority sector lending. NPAs accounted for 22 per cent of this exposure, while priority sector bad loans, including agriculture, were in single digits at 9.8 per cent. Within non-priority sector lending, large industries’ exposure stood in excess of `38,700 crore, with NPAs at an alarming 40 per cent. Iron & steel, commercial real estate and textiles are the top three stressed sectors for the bank.
Meanwhile, the bank listed talent as it utmost challenge as it is losing experienced employees. It also believes its compensation policy isn’t enough to attract talent to match prevailing business complexities and also due to a lack of performance-based incentives.
Skill upgradation
The bank believes that skill upgradation is highly required for employees, besides capacity building in specific areas like treasury, risk, management, accounting, credit management and foreign exchange operations.