To be counted, we need to target 22-25% growth in business: Vijaya Bank CMD

Bangalore-headquartered Vijaya Bank looks to leverage its core strengths, such as brand value in the South, and robust IT and risk management systems, for building its business According to Mr H. S. Upendra Kamath, Chairman and Managing Director, Vijaya Bank, the bank has set itself stiff targets this year, including 22-25 per cent growth on business mix, 20 per cent retail lending growth and 30 per cent growth in MSME advances.

Excerpts from the interview:

As the new CMD of Vijaya Bank, what do you think are the strengths of this bank and the challenges it faces?

The core strength is the brand value that the bank enjoys, particularly in the South. About 60 per cent of branches are located in the South, but they contribute only 40 per cent of the business. Given the kind of brand value that the bank enjoys, we need to leverage that for building business.

This bank has a very well-stabilised CBS in place since the past three years. MIS, whether on ALM or risk management, is drawn directly from the IT system — online in a seamless way.

Next is the robustness of the risk management system. This is one of the few banks that has applied to the RBI for permission to start advanced risk management under the market risk category. Within the next month, we will make an application to the RBI to embark upon advanced risk management under operational risk.

That said, there are areas where we have to improve. We have been growing at a sedentary pace. In the first nine months of the last fiscal, we grew at a nominal level; in Q4 we accelerated that growth and reached a business mix growth of 17.9 per cent. But we are below industry average as far as credit is concerned, while deposits are marginally above the industry growth. If we need to be counted, we need to accelerate our growth percentage. We will target around 22-25 per cent growth on business mix.

What are the other challenges the bank is facing…

Our CASA, at 25.25 per cent, is one of the lowest. This has an impact on the bank's cost dynamics. We would like our CASA ratio to grow to around 30 per cent in the next two years.

We want to grow our retail portfolio from the existing 8.2 per cent to about 20 per cent in the current year. We want to scale up the MSME segment from 22 per cent to 30 per cent.

We also want to keep our gross NPAs below 2 per cent, and net NPAs below 1 per cent. The system-driven NPA identification has been introduced fully and we are not carrying forward any legacy problems in this fiscal. So we will be able to focus on recovery in a big way during the current year. Our objective is to declare 2011-12 as the Year of Retail and Recovery.

The next action-point is to take the number of branches from 1,200 to 1,300, and increase the ATMs by another 100.

We will also re-focus on the forex and NRI deposit business. The export credit is at an abysmally low level. We are far behind the stipulated 12 per cent level. We will try to garner more export credit accounts in the current year. We would also like to grow the low-cost NRI deposit portfolio, which is very small. It will help our overall cost of funds if we grow on the NRI deposits front.

We will depute officials to the NRI cluster countries, like West Asia to start with. We are also planning to move an application for permission to set up representative office in UAE to start with.

Would you look at raising capital to meet your growth needs?

Our capital adequacy ratio is 13.67 per cent as of December 2010 and our CD ratio is at 67.7 per cent. Our low CD ratio indicates that we have enough headroom to grow on the credit front, and given the comfortable capital adequacy ratio, there is no need for us to look at raising capital immediately.

In the last three years, Vijaya Bank has not raised any tier-II bonds. We have only got support from the Government through the preferential share capital route. We have enough headroom to go the market and raise bonds.

Are there any other initiatives being planned?

There are a few products like wealth management products which we will like to introduce. But we will tread the path carefully.

We will enable all activities permitted by the RBI to be done through the ATM. We will try and increase the bank's debit card population by launching non-personalised debit card, which will form an integral part of a welcome kit. The customer will get an Internet banking ID the moment he becomes a customer. We will make these things as painless as possible. We will extend this service to our NRI customers too. We will centralise the opening of NRI accounts.

Our endeavour is to popularise products and services such as demat, online broking and cash management systems, which we already have in our basket.

We have several tie-ups with auto manufacturers, and those will be leveraged to scale up our vehicle loans. On the housing loan front, we will boost tie-up with builders in a big way. Each regional office will be given targets to organise housing loan melas and exhibitions. We will introduce an in-principle approval system for housing loans on the spot, which will get converted into final sanction subject to paper work being completed.

How do you plan to augment your fee-based income?

We should cross-sell as part of our regular job profile. We have a healthy portfolio of non-fund based business such as letters of guarantee and letters of credit. We will expand this not only through the existing corporate relationship but by adding on new relationships too.

We will look at expanding the forex business. Forex merchant business gives the ability to the treasury to do forex trading, and that gets us fee-based income.

We have various third-party products; we have tie-ups with LIC for life insurance, United India Insurance for non-life, and we have our online broking product too. Fee-based income will accrue only if you sell these products. That's why we want to have a marketing team in place and build marketing capabilities in our bank.

If it is done in a scientific way and if treasury, based on the interest rate dynamics, does a good job, then fee-based income growth of at least 20 per cent year on year is not a big issue at all.

We will launch some new products like travel and gift cards. We are looking at remittance products and portfolio management services for the NRIs.

But I am acutely aware that too many things cannot be started at one go. We will prioritise and launch various products in a calibrated way.

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