Money & Banking

How Bank of Maharashtra is rebalancing its loan portfolio

K Ram Kumar Mumbai | Updated on August 07, 2020

AS Rajeev, MD & CEO, Bank of Maharashtra

Aiming for corporate loan growth of ₹5,000-6,000 crore this year, says MD & CEO AS Rajeev

With retail, agriculture and MSME (micro, small and medium enterprises) or RAM advances growing to 59 per cent of total advances, Bank of Maharashtra now sees scope to nudge up corporate advances.

According to AS Rajeev, MD & CEO, the Bank’s board has given a broad direction that RAM advances should constitute 55 per cent of total advances, with corporate loans making up the rest.

In an interview with BusinessLine, Rajeev, who has been at the helm of the Pune-headquartered public sector bank since December 2018, said a conscious decision has been taken to cut the average exposure to corporate advances from ₹500-600 crore earlier to ₹150-200 crore.

The Bank is also stepping up gold loan advances as the possibility of them turning sour is low. Excerpts

Your Bank’s RAM portfolio is almost touching 60 per cent of total advances. Is there scope to increase it further?

Our Board’s direction is that RAM sector advances should be 55 per cent of total advances, with the balance comprising corporate loans. Currently, corporate advances account for 41 per cent of total advances. So, this year, we are trying for 5-8 per cent (or around ₹5,000-6,000 crore) growth in corporate loans. We have existing relationships with well-established corporate groups across the country. We are extending loans to state-guaranteed projects and taking exposure to operating assets (road and power assets) via securitisation.

We are restricting our per corporate exposure. Earlier, our Bank had taken high exposure limits of ₹500-600 crore. Now, we have restricted this to ₹150-250 crore per corporate. However, in the case of government-guaranteed accounts, we are going up to ₹500 crore.

What is your outlook for loan growth?

As a whole, things will start improving. Sequentially, in Q1 (April-June) FY21, our retail loan book has grown 6 per cent and MSME portfolio was up 7 per cent. If you extrapolate this growth, which happened despite the pandemic, the MSME and retail growth rate in FY21 will be 28-30 per cent and around 25 per cent, respectively.

Housing loan is the major driver of retail growth. This includes takeover of some of the accounts from some of the non-banking finance companies (NBFCs) as well as other banks.

Banks are looking to step up focus on gold loans. What is your Bank’s strategy in this regard?

When I joined the Bank, the gold loan outstanding was only around ₹22 crore. But by June 2020, our portfolio had already crossed ₹450 crore. By September, we want to reach ₹1,000 crore. Out of 1,850 branches, we have appointed appraisers in almost 1,300 branches. Infrastructure is in place in these branches. By March-end 2021, our portfolio will definitely reach ₹1,500 crore. There is no NPA in gold loans. Our interest rate is only 8 per cent. Moreover, the increase in loan-to-value (LTV) ratio from 75 per cent to 90 per cent will provide adequate support to the borrowers. So, there is good potential for growth.

Where does your Bank stand vis-a-vis loan moratorium?

In our case, loans under moratorium is around 24 per cent (or 1.55 lakh) of total eligible accounts of 6.50 lakh. This covers around 23 per cent (or ₹16,500 crore) of the total eligible amount of ₹71,000 crore as at June-end 2020. As at March-end 2020, the amount under moratorium was ₹33,000 crore.

Segment-wise: Agriculture is at ₹2,000 crore; MSME is around ₹3,700 crore; retail is ₹7,000 crore; large corporate is around ₹2,900 crore; and others is around ₹1,000 crore as of June-end 2020.

A number of borrowers (who had taken moratorium) have started servicing loans. So, my expectation is that the loans under moratorium may come down to 17-18 per cent by August-end.

Published on August 07, 2020

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