Money & Banking

We don't want to lose sight of our profitability: Bhasin

Anjana Chandramouly Parvatha Vardhini C. Bangalore | Updated on March 04, 2011

Mr T.M. Bhasin, Chairman and Managing Director, Indian Bank

In challenging times like these, the focus for Indian Bank is more on profitability. “Balance sheet size is one part, but we do not want to lose sight of our profitability. We don't want to be seen as unnecessarily growing the balance sheet at the cost of profitability,” Mr T.M. Bhasin, Chairman and Managing Director, Indian Bank, told Business Line. Excerpts from the interview:

This year being a momentous one for the banking industry — in terms of regulatory changes and liquidity pressures — what has been the experience as a banker, and the impact on your bank?

Our strategy has been of shifting focus from investment portfolio to lending book, that's how we have augmented our earnings also. Our CD ratio was 67 per cent as of March 31, 2010, which has gone up to 73 per cent now.

At the same time, deposit accretion has also kept pace. What we have done is watch the market sentiments and have increased rate of interests both on loan book and on deposit side before the market. That's how our NIM has improved steadily from 3.71 per cent in March 2010 to 3.84 per cent in December 2010.

We have been able to protect our profitability. Our average net profit growth despite the volatile conditions remained above 12 per cent, which is very stable.

We have seen 25-26 per cent growth in savings and 12-13 per cent in term deposits. On the loan side, we have gone slow on retail deliberately – it is about 9 per cent, but our agriculture portfolio has seen 25 per cent growth, MSME – 25 per cent, and commercial and corporate – 31-32 per cent.

Overall for the three quarters, the growth has been about 28 per cent in the loan book and 22 per cent in the deposit side.

We went ahead with the system-driven identification of NPAs in June.

As of March 31, 2010, gross NPAs were Rs 510 crore, and because of the system-driven identification Rs 830 crore was added; gross NPAs stood at 0.73 per cent in March 2010, which went to 1.45 per cent in June and now has come down to 1.02 per cent. In March this year, we expect it to be below 1 per cent.

How is liquidity pressure now?

We have about two per cent surplus SLR available with us, and through the LAF window, I can mobilise 2 per cent more. So, about Rs 4,000 crore is still available with us. We have slowed down on the short-term loans. The focus today is that we ensure that the money we are sanctioning should go for productive purposes and that end use of funds should be ensured.

Today, I am raising funds at 10 per cent and I cannot lend at 9.5 per cent. So we are very prudent, and I have shared with my colleagues that I do not want top-line growth but bottom-line growth.

Balance sheet size is one part, but we do not want to lose sight of our profitability. We don't want to be seen as unnecessarily growing the balance sheet at the cost of profitability.

As such, we have not faced any liquidity constraint and we have not been borrowers in the market. We have been taking advantage of the LAF window, wherever opportunities arise and we are not building long-term asset liability mismatch also.

What is the progress on the FPO plan?

We have got the board approval, and have sent a request to both the government and RBI. The RBI has already recommended the proposal to the government. And they are processing it. We have to wait for the audited results of March 31, 2011, which will be available in April-end, and during this period we will finalise the DRHP, etc.

We will always keep in mind the market trend, and we don't want to sell the equity at cheaper price. We will go for it only if we get a fair value of share premium.

Our CRAR is at 12.35 per cent, and tier-I is at 9.76 per cent. In this, we have not included the profits for the current year, and if we do that, it should be jacking up the CRAR to over 14 per cent, which takes care of the credit growth for the next year also.

How is your NPA position, and what is being done on the recovery front?

Our gross NPAs have come down from 1.45 per cent in June 2010 to 1.02 per cent in December. We have made aggressive recoveries; about 96 lok adalats have been held. We have gone aggressively with the follow-up and have good results.

From gross NPAs of Rs 988 crore in June 2010, we have come down to Rs 752 crore in December 2010.

What are you doing to improve your CASA?

CASA is 33 per cent. We are concentrating on account opening campaigns. All branches will be aggressively campaigning till March 31. We are also aggressive on opening ATMs. There are two employees in each ATM to promote new savings accounts. This is one avenue for increasing the CASA.

A lot of focus is being given on financial inclusion – urban and rural. A lot of new accounts are being opened. Smart biometric cards are being issued. More the number of accounts opened, the more will be residual balances and CASA growth will happen. Besides there is linkage with Internet and mobile banking services.

What challenges do you see in maintaining NIMs going forward, since we have moved into an elevated interest rate regime?

There is clearly some pressure on this, and we are internally debating on augmenting our non-interest income or fee-based income so that overall profitability can be protected.

We are looking at avenues such as bancassurance, syndication, increasing the non-fund based business like LC, BC, etc, gold coin sales, locker facilities, etc. We are also looking at opening e-branches in the future.

Branch expansion and recruitment plans?

We have 1,825 branches now, and by March 31, we should have 1,875 branches. The ATMs will go up from 1,100 today to 1,150 by March. We will apply for licences for 2011-12 also. By March 2012, our number of branches should be around 2,000.

Fortunately, we have enough staff – 19,100 employees to take care of Rs 1.75 lakh crore business as on date. To take care of attrition and superannuation, we will be recruiting 685 clerks and 800 probationary officers. In addition, there will be recruitment of specialist officers. The intake will be around 1,700, which should take care of the 2010-11 and 2011-12 attrition, superannuation and growth of business.

Published on February 27, 2011

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