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Indian Overseas Bank (IOB) will be strengthening its turnaround plan by adding a few more focus areas to the strategy in order to turn profitable this year.
Karnam Sekar, who took charge as the Managing Director and CEO of IOB on July 1, said on Tuesday that the bank is carrying forward the initiatives taken by his predecessor R Subramaniakumar as part of the turnaround strategy.
Focus areas
However, Sekar would lend a special focus on three areas to turn profitable and to come out of the Reserve Bank of India’s (RBI) Prompt Corrective Action (PCA) framework.
The bank will focus on improving its net interest income (NII) and net interest margin this year. “Our NII has been stagnant and it is also one of the lowest as we have not been able to grow the book in the last four to five years due to restrictions as part of PCA. We will try to grow advances in areas such as housing and jewellery loans,” he said.
Also, the bank will focus on improving CASA percentage as it is lagging behind public sector banks’ growth level.
Reducing bad debt
“We need to catch up and improve so that our NIM also improves. With growth in NII and NIM, we hope to improve the operating profit and then we hope to report net profit this year,” he added.
Sekar said the bank’s sale to asset reconstruction companies (ARCs) was lower in 2018-19 compared with that in previous years. This year, IOB will push more sales to ARCs. Also, the bank will give a stronger push for higher one-time settlements (OTS). All these initiatives are aimed at reducing the net NPA of the bank which stands now at about 11 per cent.
PCA framework
“We need to bring it down to 6 per cent to come out of the PCA,” he added.
Many public sector banks that were brought under the PCA after IOB have come out of the framework. But IOB continues to remain in the PCA. It hopes the progress it has been making in the last few quarters would help it turn profitable this year and eventually come out of the PCA.
Though it reported its highest-ever operating profit at ₹5,034 crore for FY19, it reported a net loss of ₹3,738 crore — down from ₹6,299 crore in FY18. Net NPAs stood at 10.81 per cent in Q4 of FY19, down from 15.33 in FY18.
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