The worst is over for Indian Bank and it is now on the growth path, according to managing director and CEO, Kishor Kharat . Interestingly, despite net profit for 2017-18 slipping 10%, the bank’s board of directors had declared a 60% dividend, which is the same percentage declared the previous year, too. Excerpts from an interview:
The first three quarters were good for you, but Q4 net fell 59%. Your comments?
The fourth quarter was slightly difficult... The Reserve Bank of India came out with revised guidelines on non-performing assets (NPA). As a result, the earlier circulars were all withdrawn. Necessarily, all these accounts which were under process had to be downgraded.
On the one side, there was a jump in downgrades, because of which we had to make more provisions as well as interest reversal. Secondly, the depreciation provisions added to the bottomline. Thirdly, we used to get profit on sale on investments. That could not take place. Thus the Q4 bottomline got squeezed.
Going forward, how do you intend tackling the issue?
These are unusual situations and I don’t think it will continue for long time. So, in future there will not be much pressure on profit. If yields are better, treasury will also start giving profits. From the first quarter onwards, we are expecting improvement. Even though there was pressure on net profit in Q4, the overall impact was hardly 10% reduction compared to last year. But, operational profit grew by 25%. For the first time, our profit crossed the ₹5,000-crore mark compared with ₹4,000 crore last year.
What is the status of non-performing assets?
Most of the stressed accounts have been downgraded. There are no more big accounts in the pipeline to be downgraded. In this fiscal, there will not be much pressure on NPA. Therefore, we are expecting gross NPA to be lesser than 7% and net NPA close to 3%.
How are you to going to mitigate lending risk?
We are shifting our lending focus from the corporate sector to retail, agriculture and Micro, Small and Medium Enterprises (RAM), because the risk is well spread. Currently, lending to corporate sector stands at 42% down from 49%.
Lending to the RAM sector now stands at 58% and we will aim to increase this to 60%. This year, we have shown a 26% increase in loans to the RAM sector. Loans to the retail sector grew by 32.15%, to agriculture, 25.9% and MSME, 21%.
Are you expecting any recapitalisation from the Centre?
The Government of India complimented us saying that ‘this is the bank which is having self sustainability and they can have their own capital plan’. This year also, we are not anticipating any government capital; rather we will be going on our own in the market. The GoI will not be pumping in funds as we have to bring down its shareholding to less than 75%, this year.
How did the bank perform during the first year of its five-year plan?
We surpassed our target. We were expecting total business of ₹3.6 lakh crore, but the bank did total business of ₹3.7 lakh crore. If we grow at this rate, we are quite sure the targets for the five-year plan contemplated will be achieved well within the timelines.
What is the target for the current fiscal?
This year, our growth will be ₹4.25 lakh crore from ₹3.71 lakh crore. Our five-year plan business volume was fixed between ₹3.6 lakh crore and ₹4.45 lakh crore. We are not changing it. We will see it how it goes [in the first] six months. Our capital requirement for the current year would be roughly ₹3,000 crore.
