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MUMBAI : IDBI Bank aims to reduce its bad loan ratio to 15% of advances by the end of this year through a mix of loan growth and by transferring toxic assets to the bad bank, its chief executive Rakesh Sharma said on Wednesday.

IDBI Bank is no longer subject to strict lending curbs, which were imposed by the Reserve Bank of India (RBI) in May 2017, with the central bank stating in March that the private sector lender has been taken out of the prompt corrective action (PCA) framework.

As on 30 June, the bank’s gross bad loans were at 22.71% of its total advances. However, because of aggressive provisioning, its net bad loan ratio stood at 1.67% in Q1FY22. The lender’s loan book was 1.56 trillion in the same period. The bank expects a loan growth of 8-10% in FY22.

“We will be able to reduce our gross non-performing asset (GNPA) ratio by 4-5% through growth in advances or the denominator. Now, the government has also come out with the National Asset Reconstruction Company Ltd (NARCL). Once NARCL becomes functional, some assets will be transferred and that would further reduce gross NPA by 5-6%," Sharma said.

The bank plans to transfer a total of 11,000 crore- 12,000 crore of advances to NARCL, of which live accounts will be 7,000 crore- 8,000 crore, with the rest having already been written off.

On the loan growth front, the lender had a 62:38 ratio between retail and corporate loans as on 30 June, indicating a shift since it came under the PCA restrictions in 2017. The bank now wants to restart corporate lending and has onboarded 80 clients. It has sanctioned loans to these corporate entities after restrictions were lifted, but the loans have as yet not been disbursed.

“We have special expertise in corporate advances and we will continue to do that. There will be a lot of focus on mid-corporate advances. There are certain good sectors and good-rated advances available and we have done some sanctions also," Sharma said.

As much as 90% of the lender’s structured retail book is asset-backed and the auto and personal loan portion is quite small, Sharma said. The bank would like to have a 60:40 mix of retail and corporate loans, but does not want its retail book to go below 55% of total base.

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