Post-PCA, Central Bank will not go the whole hog in acquiring assets

We were in losses for the past six years. For the first time, we recorded a profit in the March 2022 quarter and subsequently in the June quarter. We knew for sure that we will be coming out of PCA. It was only a matter of time. After inspection in the previous month, the RBI’s team was satisfied that what the bank has been doing and achieving is sustainable. It is not just about the numbers—satisfying the PCA benchmarks (capital, asset quality and leverage). It is also about sustainability regarding the policies we have framed via-a-vis each aspect of our business, how underwriting of assets is happening and robustness of internal controls. So, RBI will gauge all these things.

It was not as if lot of restrictions were placed on us once our bank was placed under PCA. There was no bar on recruitment. But the only hurdle was that the cost-to-income ratio could not go up. For branch expansion, we had to take permission. For assets, RBI said we could not go below investment grade. So, these were not hurdles for us. If we look back, whatever discipline has come, it is because of imposition of PCA. It really helped us grow with quality. We also understand that if we waver from the set path again, we will meet with some accidents. So, lifting of PCA doesn’t mean that we will go the whole hog in acquiring all kinds of assets. We will be very disciplined in acquiring assets. We have worked on improving confidence of our people to take decisions. This has helped our bank move forward in a very balanced way.

When it comes to our loan book, we have reached the targeted balance, with 63 per cent of the loan book comprising retail, agriculture and MSME (RAM) advances and the balance 37 per cent comprising corporate advances. So, we want to maintain this balance. Our growth will be equitable among RAM and corporate segments.

Our total advances are at ₹1.89 lakh crore. But our risk-weighted assets (RWA) is 65 per cent. That means whatever assets we have acquired are all highly rated ones. These are all capital light assets. So, to acquire these assets, the interest rate matters. For good rated assets, borrowers definitely demand low rate of interest. We can offer this because low cost current account, savings account (CASA) deposits constitute 51 per cent of our total deposits. This gives us the pricing power.

Our credit-deposit ratio (CD) was 52 per cent a year back. Now, it is touching 57 per cent. Here whatever amount we are putting in the credit book, almost an equal amount is placed in the investment book. In the investment book, as on date, we have liquidity of ₹38,000 crore. These resources are available to us for lending.

We are the largest lender among public sector banks via co-lending with non-banking finance companies. We have about ₹3,000 crore outstanding loan portfolio (comprising home loans, MSME loans backed by mortgages, gold loans and medical equipment financing) via the co-lending route. Right now, we have co-lending tie-up with 11 NBFCs. We intend to increase such partnerships to 25 by March 2023.