INTERVIEW | Padmaja Chunduru Industry

Arresting fresh slippages is key

Target for NIM is 3% for FY20, we have to get the pricing right: Indian Bank MD

After posting improved financial performances for the first and second quarter of the current fiscal, Indian Bank is planning to sustain its growth momentum, even as it gears itself for amalgamating with Allahabad Bank. Indian Bank managing director and CEO, Padmaja Chunduru, talks to N. Anand. Edited excerpts:

Are you satisfied with Indian Bank’s performance for the last two quarters?

We have been working on recoveries and arresting fresh slippages. Last quarter, we showed good results, and this quarter, the whole thing came together whether it was business growth, earnings or asset quality, capital and return on assets. The bank scored on all the profitability parameters.

What will the focus be, going forward?

Going forward, the focus is to continue doing the good work people across zones have been doing so that we sustain the momentum.

We should not take our eye off the slippages and that holds the key. We have to focus on recovering assets that have turned bad and arrest build-up of portfolio. It has come to ₹700 crore and that would be a good development if we can restrict it to ₹800 crore per quarter, not counting the one-off things might happen.

The bank is on the right track to sustain the momentum. The focus on growth with earnings and profitability will be the foundation. Second is the amalgamation and we are working on that.

Would you have any cause for concern around your net interest margin and current and savings accounts (CASA) deposits?

When compared to last year, net interest margin (NIM) is down. The environment has changed quite a bit since then. But, NIM has improved quarter-on-quarter from 2.85% to 2.92%. We are targeting 3% for the fiscal and are working towards that. Mainly, it will come from pricing the risk correctly. We have Retail, Agriculture, MSME (RAM) and Corporate portfolios.

So, everywhere if we take proper decisions around pricing, I think we will be able to achieve the target. We need to tweak the interest rates.

CASA grew 10.6% over last year. That’s good growth given the kind of changes happening around [us]. Current account grew by 7.5%, savings bank accounts grew by 11% and term deposits grew by 18%. I am happy with the growth of term deposits as these are stable, long-term core deposits of the bank. These are indications of the commitment customers have towards the bank.

At 7.2%, don’t you think that Gross Non-performing Assets are on the higher side?

It is one of the lowest among the public sector banks. Additions over the last few quarters have been coming down from ₹1,700 crore to ₹750 crore. By arresting slippages, we will be arresting the figure. Recoveries have to come. Problem is that it has been one-sided. We expect slippages of about ₹600-₹700 crore per quarter in the RAM sector; out of that ₹200-₹300 crore will be upgraded. And then you will have recovery from legacy accounts that are lying with NCLT. But that is not coming at the pace one expects.

We were expecting ₹1,500 crore from NCLT this year. When the recovery starts happening, then the 7% will come down to 5% or 6%. And then, it would take two to three years to reach the 2% level. This is for Indian Bank on a standalone basis.

What is happening on the amalgamation front with Allahabad Bank?

We have already started the process and my priority is to communicate with the staff and customers as to how the merger will happen, the synergy and vision about how the combined entity will work. These are areas which have to be addressed. I have conducted two townhall meetings and the third will be held soon.

Luckily we had a precedent. We amalgamated Indian Bank’s Pandiyan Grama Bank with IOB’s Pallava Grama Bank. Both were on different platforms. TCS and Indian Bank worked very closely and within six months, all 600 branches went live simultaneously. It is a big comfort for me. What we did with 600 branches we need to do with 6,000 branches.

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Printable version | Jul 7, 2020 12:58:42 PM |

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