The Hindu Business Line : Karur Vysya plans pan-India presence

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Coimbatore Feb. 11 Karur Vysya Bank, according to its Chairman, Mr P.T. Kuppuswamy, believes in steady growth and performance consistency. While its regional presence over the last nine decades has not hindered its growth prospects, it is now looking at establishing a pan-India presence by opening branches in the Northern and Eastern parts of the country.

Excerpts from an interview on the bank's performance during the last (third) quarter of the current fiscal:

Reasons for your net profit remaining almost stagnant this quarter compared with the corresponding quarter of the earlier fiscal.

Though the net profit at Rs 26.19 crore this quarter compared with Rs 25.86 crore during the previous quarter seems stagnant, the operating profit has risen by 36.9 per cent to Rs 61.51 crore (Rs 44.93 crore). We increased the provision for taxation by valuing the investments at market rate and making appropriate tax provision. The market has since then taken a slide.

You have in your Rights Issue Prospectus said there is a mismatch in asset-liability. How do you visualise its impact on deposit cost?

Reliance on short-term funding is not unique to KVB alone. It is common to the entire banking system. Given the current economic scenario and the fact that globalisation has its impact on the monetary policy of the Reserve Bank of India, we cannot lock in our liability at higher interest rate for a longer term.

How much have you been able to mop-up through your special deposit schemes.

We have introduced two special deposit schemes — KVB 90 plus and KVB 500. The volume of deposits generated out of the two schemes amount to Rs 150 crore and Rs 200 crore respectively. We are giving thrust for mobilising savings bank deposit. The campaign is on.

But your low-cost deposit proportion is relatively low at 28 per cent.

Three years ago, our percentage of low-cost deposits was around 23 per cent. It has now increased to 28 per cent, thanks to the thrust on these deposits leveraging the CBS. This compares favourably vis-à-vis the low-cost deposit ratios of peer group banks such as Karnataka Bank (20.88 per cent), Federal Bank (25.02 per cent) and South Indian Bank (26.41 per cent). We have, however, given adequate thrust for taking the LCD percentage to around 35 per cent and have chalked out appropriate strategies.

The bank's exposure to commercial real estate has increased from Rs 15.74 crore in 2004-05 to Rs 141 crore in 2005-06. Your comments

It is pure commercial real estate exposure only, basically in the metros, where development and real estate sector activities are on the higher side. These loans are backed by established people and are secure in nature. We get competitive rates of interest in this sector. A majority of these are project-based, recycling and self-liquidating in nature. In addition to primary security, adequate collaterals are also accepted to secure the loans.

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Karur Vysya plans pan-India presence