Kerala-based Dhanlaxmi Bank, which was in the red for a long time, made a turnaround this quarter, registering a net profit of ₹25.14 crore against a loss of ₹119.37 crore in the corresponding period of the previous fiscal.
The achievement was made possible by streamlining operations and cutting down excess manpower, which led to a considerable reduction in operating cost, said PG Jayakumar, Managing Director and CEO.
He attributed the success to the massive support and trust the 88-year-old bank received from institutional and individual customers as well as the efforts of its employees.
Jayakumar told
The new synergies, coupled with the lower average age of its manpower force, are expected to boost the efficiency and performance of the bank in the future, he said. The focus has shifted from wholesale to pure retail, both under liabilities and assets. The current account, savings account (CASA) balances improved from 18 per cent to 23 per cent in the last three years. The time-tested customer-centric business model was established in place of the centralised vertical model that had caused the setback.
This helped reduce the cost to income ratio to 88 per cent from 125 per cent three years ago. The cost of deposit came down to 7.91 per cent from 8.42 per cent and the net interest margin improved to 2.35 per cent. Return of assets turned positive, while the capital adequacy ratio improved from 9.49 per cent to 12.75 per cent under Basel II and 11.68 per cent under Basel III now.
On NPAs and steps taken to recover bad loans, the MD said the lending policies during 2009-12 led to accretion of large NPAs, which reached a level of 4.52 per cent from 0.66 per cent. Even after recovering over 50 per cent of these NPAs in the last two years, recovery continues to be a major challenge.
However, the bank is giving a huge thrust to NPA recovery, which will release large value suspended income and provisions. Strict measures like SARFAESI actions, putting wilful defaulters in a tight spot, publishing their names in the media, conducting recovery camps and adalats, are part of the strategy for recovery. The push to recover bad loans has started showing results now.
Sale to ARCs The bank plans to sell ₹100-150 crore bad loans to asset reconstruction companies in the current quarter. It is now lending carefully against collaterals and monitoring asset quality closely, he said, adding that growth was likely to be at around 15 per cent a year over the next five years.
On growth in advances, he said focus is on MSME, retail assets, agriculture, micro-finance and gold loan segments. The bank has enlisted the services of Ernst & Young to advise them on the business re-engineering plan for the next five years.
To boost capital adequacy and comply with regulatory directions, the bank was able to raise equity capital of ₹414 crore and subordinated debt of ₹107 crore, aggregating ₹521 crore in the last two-and-a-half years. The bank has a healthy capital adequacy ratio which meets the regulatory standards.