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With a substantial current account savings account (CASA) base, Dena Bank's profitability could take a hit from the savings rate de-regulation.
"We will have to find ways to pass on the policy changes that the RBI wants, and at the same time minimise the dent on our profitability," says Ms Nupur Mitra, Chairperson and Managing Director, Dena Bank, in a interview with Business Line.
Excerpts from the interview:
Q: What will be the impact of savings rate de-regulation on Dena Bank?
A: Dena Bank has got a substantial CASA base, so any hike is going to affect the probability. We will have to find ways to pass on the policy changes that the RBI wants, and at the same time minimise dent on our profitability. The ALCO will be meeting and discussing this.
Q: What is the mix of Rs 1 lakh and the over Rs 1 lakh segment in your bank?
A: It will be 40:60.
Q: What impact would a 50-basis-point hike bring on you?
A: On a very rough calculation, every basis point hike would mean almost half-a-basis point impact on profitability.
Q: What will be the challenges and opportunities that a vibrant corporate debt market would throw up?
A: India still doesn't have a vibrant corporate debt market. We need to introduce certain incentives to go for the debt market instead of equity or normal fixed deposits. In between, we came up with certain measures, but…
As a banker, we are always ready to face challenges. I have always felt that with every challenge we have come out the stronger. As bankers, we will face this challenge and come out with more profitable models.
Q:What all initiatives have you lined up in your capacity as the new Chairperson and Managing Director of Dena Bank?
A: I will immediately be pushing the case of the SME segment, which I am very passionate about and I also feel that lot of things have to be done in the area of financial inclusion. During the next three months, I will looking at these areas.
Q: What will be your targets for the SME and MSME sectors?
A: In MSME, you cannot look at numbers. But I would like to look at SME at 30-40 per cent in percentage terms. It is a very humungous task that cannot be achieved in one or two quarters.
Q: Given the challenging environment now, how difficult would that be?
A: Reaching the SME target should not be that difficult for Dena Bank because our base is in Gujarat and Maharashtra. These are the most 'happening States' in the country. We have lot of opportunities to tap.
Q: What are the pressure-points in sectors such as power and aviation?
A: Aviation is in difficulty and, fortunately, Dena Bank doesn’t have much of an exposure there. We do have an exposure in the power sector, but I do not see an immediate crisis in that sector. There are some issues, but these are all temporary and can be sorted out.
Q: The banking system is expected to be faced with 350 million new customers in the near future. What are the challenges and opportunities?
A: The banking industry is catering to 10-15 per cent of the population. There is a huge opportunity lying there. We need to improve our capabilities to reach out to all the population. Financial inclusion can be a profitable model if only we have the patience, attitude and passion.
Q: Will you pass on the cost of savings rate de-regulation to the customer?
A: You can pass it on only to the extent the customers can absorb it. If you are focusing on SMEs, there is a limit to which you can do it. I would definitely like to keep them viable.
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