Secret behing the success of Indian Bank

Indian Bank expects recoveries to be more than slippages in this financial year, which will result in improved asset quality.

Shanti Lal Jain, managing director and chief executive officer of Indian Bank, tells Manojit Saha in an interview that the lender will continue to focus on retail, agriculture, and micro, small and medium enterprise (MSME) loans.

Indian Bank's loan growth till December 31 was below that of industry. Are you being cautious?

The growth in RAM (retail, agriculture, and MSME) is 12 per cent, and retail loan growth is 15 per cent. All retail components are growing between 12 and 27 per cent.

Our growth is less in corporate lending because of interest rates. This is also because we continue to remain selective, based on the margin available. If the margins suit us, only then we are going ahead, otherwise we will continue with RAM. Our RAM is 62 per cent of the total loans, one of the highest in the industry. This is reflected in a stable balance sheet and profitability. We would like to maintain this ratio.

What is the credit growth projection for the current financial year?

We will continue to grow at 13-14 per cent.

On the deposit side, the growth of current and savings account deposit is in single digits. How do you plan to improve this?

As far as the domestic side is concerned, we are maintaining 41 per cent [of total loans]. Interest rates have increased, so people would move funds partly from savings accounts to term deposits.

Secondly, in the third quarter, which was a festive season, people incurred more expenditure. We are taking several initiatives like opening accounts via tablets, and we have opened 2.7 million accounts in the first nine months of the financial year. So we are focusing on deposit growth.

Secondly, our deposit growth was 10 per cent (or Rs 56,000 crore) last year, whereas the growth in advances was Rs 27,000 crore.

So we were carrying excess liquidity. This year, we have deployed the liquidity for credit. Going forward, we will work to increase the deposit base.

The peak deposit rate for Indian Bank is 7 per cent for 555 days. The Budget announced a savings scheme for women depositors offering at 7.5 per cent. Is there a plan to increase deposit rates?

Deposit rates are dependent on liquidity and credit growth.

The deposit scheme announced in the Budget is for two years. Banks generally take deposits for one or one and half years.

My present rates are competitive. If the situation arises, we will raise the deposit rates to meet credit needs.

Will you be able to hold on to the margins of the third quarter?

Our margins in the first quarter was 3.1 per cent, while it was 3.2 per cent in Q2 and 3.7 per cent in Q3.

When you are in an increasing interest scenario, the assets get re-priced immediately like the repo-linked advances and deposits get re-priced with a lag.

On an average, we were 2.91 per cent last year and 3.35 per cent for the nine months this year. I am hopeful we can maintain the margin.

What is the percentage of advances that are linked to repo rate and to MCLR?

Around 56 per cent is linked to MCLR and 37 per cent to repo rate. MCLR will also come for re-pricing, and when that happens income will also increase.

How has been the bank's recovery so far?

Recovery for the December quarter was Rs 2,600 crore and slippages stood at Rs 1,300 crore. So recovery was higher than the slippages. For the nine-month period, recovery was Rs 6,500 crore and slippage was Rs 5,300 crore. This has two benefits —-- one asset quality improves and provision requirement comes down.

In the beginning of the year, we had said we would recover Rs 8,000 crore, that means Rs 2,000 crore per quarter. In the first nine months, we have achieved 110 per cent of the target. In this quarter also, we can recover Rs 2,000 crore, which will be more than the slippages.

When do you expect recovery from SREI group exposure?

Maybe by next quarter because the process will take some time. We have fully provided for this account.