(BoI) has set an ambitious quarterly recovery target of Rs 2,500 crore for the current fiscal year as the public sector bank looks to expand after years of stagnation. CEO AK Das said he expects the loan book to grow double digits this year and hopes to keep variances at an average of Rs 600 crore per quarter.

The public sector bank reported gross NPAs of 9.98% of loans for March 2022, up from 10.46% in the December quarter. Das said he expects the bank’s NPA to come in below 8% in March 2023, due to a combination of improving recoveries on bad loans and muted new slips.

“Our target is to win back Rs 2500 crore per quarter and only let down Rs 600 crore so we are in positive territory on NPAs. As of the third week of June we have achieved Rs 1900 crore in returns so far in the first quarter,” Das said.

However, a large proportion of the recoveries depend on the bank’s cases before the National Company Law Tribunal (NCLT) where Rs 32,000 crore of the bank’s 45,000 crore gross NPAs are awaiting progress. The bank will also sell Rs 2400 cr in bad loans to the newly formed National Asset Reconstructuin Co Ltd (NARCL).

BoI is the lead lender to the Kishore Biyani promoted Future Group, which owes lenders more than Rs 25,000 crore. In April, it initiated bankruptcy proceedings against Future Group, pending approval by the National Company Law Tribunal (NCLT). Das said the bank booked slips of Rs 600 crore from the Future Group in the quarter ended June 2022 and has now fully funded its exposure to the group.

Das said higher recoveries would complement the bank’s growth plans as it looks to expand its loan book with larger bets on the mid-cap segment.

“This year our focus is more on the mid-cap segment, where we can do much better. We’re expecting loan growth of 8% to 10% this fiscal year, which is in line with system or just above it. We anticipate that our net interest margin will be as high as close to 3% as possible and borrowing costs as low as 1% because we have taken a lot of proactive precautions. Housing and retail will continue to grow faster than the rest,” Das said.

He expects corporate credit to grow this year after contracting last year largely on demand from core sectors like steel and cement.

“I expect strong growth in the construction sector, which has forward and backward integrations with up to 132 sectors, which together with the government’s push for infrastructure will create a multiplier effect,” Das said.

Business demand for the bank was subdued as less than half of the sanctioned Rs 65,000 crr was used.

The bank’s board has approved a Rs 2,500 crore capital raising but with the current equity position at 17% the call for more equity raising will not be heard until the end of September, Das said.