Money & Banking

Recovery is the watchword for us: Dena Bank chief

K Ram Kumar Mumbai | Updated on January 22, 2018 Published on September 27, 2015


In the backdrop of rising bad loans and a slowdown in corporate credit, “RRAM” has become the watchword for Dena Bank. RRAM is an acronym for recovery, retail, agriculture and micro, small and medium enterprise loans. Chairman and Managing Director Ashwani Kumar, who has been at the public sector bank’s helm since January 2013, says it is important to establish connect with the borrowers to ensure that loan repayments are on time. His bank is trying to do this through regular follow-ups. In an interview with BusinessLine, Kumar explained that Dena Bank is not renewing high cost deposits, placing more emphasis on low-cost current and savings deposits, and going the extra mile on RRAM. Excerpts from the interview:

What steps are you taking to improve profitability?

If you have seen our results, the profits (in the June quarter net profit was at ₹15.16 crore against ₹81.52 crore a year ago) have not come up to expectations mainly on account of increase in provisioning for non-performing assets (NPAs), though we have been able to maintain the net interest margin despite the adverse situation.

 We have decided that we will try to maintain an average Credit-Deposit Ratio of 73-74 per cent (right now it is at around 70 per cent). Deposit taking will not be so aggressive unless and until credit offtake is there. We have been able to shed bulk deposits – we are not renewing certificates of deposits which are maturing. So, the main thrust is to focus on growth in advances, which will improve our income and also will help us reduce NPAs in terms of percentage.

Which will be your focus areas on the credit side?

We launched a big campaign on July 1 for vehicle financing — cars, commercial vehicles and two wheelers — to boost our retail loans portfolio. This move was to draw the attention of the field functionaries towards retail. Now, we have launched a home loan campaign, whereby along with home loans we are also offering car loans and loans for furniture and fixtures.

 So, housing, retail, crop loan, micro, small and medium enterprise (MSME) loans and garnering CASA (current accounts and savings accounts) continue to be thrust areas. We have stopped chasing high-cost deposits. Between March-end 2014 and March-end 2015, our corporate credit has come down by ₹3,000 crore to ₹3,500 crore.

For us “RRAM” is the watchword. Recovery, Retail, Agriculture and MSME.

We were planning to open 400 branches this year. We are having a re-look on that. Initially, the branches we opened were in a loss for at least 1.5-2 years.

So, are you are going slow on branch expansion?

The business will be mobilised in a particular area before a branch is opened. We will be very selective in giving permission to regional offices to open branches. Branches will be opened only after some business has been mobilised. So, the leg work will start 30-40 days before a branch opens so that it has ₹1.50-2 crore business (loan/deposit) commitments on the first day itself.

 If people are able to aggressively mobilise business in all the 400 identified locations then we will open as many branches. But they have to be profitable in the first year of operations.

Why did the cost-to-income ratio jump in the June quarter?

The cost-to-income was 70 per cent in the first quarter due to extra provisions (on account of wage revision and some short-provisioning, which had to be covered) that had to be made. This has to be brought down substantially. It was around 58-59 per cent in the year ago period.

 So, now when we are financing a vehicle, we have asked our branches to ensure that insurance is also done by them. We are selling insurance policies. So, retail is our main focus area. The bank has done very well in the agriculture sector.

  Our focus is on current accounts and savings accounts, retail and small and medium enterprises (SME). In the September-December period, we expect to see a lot of improvement in SME credit. 

What are you doing to tackle non-performing assets?

We have placed a big thrust on NPA recovery. After the June quarter, myself and the ED are monitoring loans accounts of ₹1 crore and above. In the small accounts the slippage was to the tune of ₹250-300 crore.  Now, we are containing that slippage.

In the case of large accounts, we are in consortium and whatever is done by it we take a decision. In the case of (non-performing) assets of ₹2 lakh and below, we had a special compromise scheme for settlement of debt. It was not so successful. Now we are putting about 49,000 such accounts aggregating around ₹220 crore on sales to ARCs all over India.

Zonal managers and general managers are all closely monitoring accounts up to ₹1 crore. Not many bank chiefs monitor loan accounts between ₹1 crore and ₹10 crore. They usually monitor accounts of ₹10 crore and above.

 With profit avenues coming down in the backdrop of rising bad loans, it is better to focus our energies on (loan) recovery. In recovery, the only speciality is how many times we knock on the borrower’s door. That is all. How do NBFCs recover? Why is their recovery so good? Their people land up at the borrower’s place in the evening. So, we have to remind our borrowers continuously about payments. Otherwise, lack of follow-up also leads to default.

Published on September 27, 2015

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