Recently, the Reserve Bank of India (RBI) announced some relaxations to ease the tension in money market. How helpful would those be for your bank?
These measures will certainly ease burden on banks. We were not as strained as far as liquidity was concerned. Our reliance on wholesale funds is low.
High-cost deposits and certificate of deposits (CDs) together constitute less than 9% of total deposits. Also, Current Account Savings Account ratio is held around 30%. However, the rising long-term yields on investment portfolio could have dragged our profitability.
What else do you expect from the RBI to help banks tide over these conditions?
RBI has been flexible with its approach as warranted by circumstances. There are many difficulties, however, those cannot be wished away with regulatory breathers. Creating conducive investment climate by stemming the sentiment of slowdown is most important as of now.
How do you plan to protect the margins amid weaker credit demand, deteriorating asset quality and economic uncertainty?
Margins are likely to remain under pressure, given the challenges around.
Corporate loan off-take has been subdued in the first quarter, reflecting weak demand conditions in industry while raising deposits continue to be costlier with shrinking income of households and corporates in a slowing economy.
Then, there is the cost due to the slippages on asset quality. Our focus for lending this year is on retail, agriculture, and micro & small enterprises (MSME) sectors. Encouragingly, we have been witnessing better demand as also lesser strains on quality in these focus areas so far.
How are the results panning out in terms of retail loans?
We are celebrating financial year 2013-14 as the 'Year of Retail'. The rural and semi-urban demand has been resilient compared with metros even amid this slowdown in economy.
It's natural to focus on this opportunity given our diversified outreach, where 59% of our branches are located in rural & semi-urban areas. We also introduced online loan application facility for home loan, vehicle loan, education loan and loan against property.
This facility is integrated with the bank's existing loan processing system that ensures fast turnaround time. We are also implementing the centralised retail credit processing set-up at major metros and cities.
Our recent performance reflects these efforts; following 22% annual growth in 2012-13, the bank's retail advances have again grown 23% on an annual basis as against overall loan growth at 16.5% in the April-June 2013 quarter. We are growing as per our expectations.
Any thoughts on revising the interest rates on loans and deposits?
We recently reduced base rate by 25 bps to 10% as we were expecting, like others, that policy rates would go benign in the remaining fiscal and there would be lesser strains arising due to mismatches in growth of advances and deposits.
However, the developments since May 22, when Ben Bernanke first signalled a possible tapering of stimulus programme of the Fed, have taken everyone off-guard.
The reassessment says room for rate easing in the remaining of the fiscal is very limited. We will wait and watch till month end. If we are not getting deposits at the desired rates, then we may have to increase them and that will have a bearing on the base rate.
What are your year-end business targets? Have you revised them, considering the current economic scenario?
Considering the slow recovery expected in economy, our focus continues to be on pursuing quality growth. Our guidance for deposit growth is 14-15% and for credit, it's 15-16%.
We have given a guidance that net interest margins will be around 2.9% for the year. Notwithstanding the challenges, our efforts will be towards achieving this objective.
What about capital raising plans this year?
The requirement for the current financial year comes to Rs 1,139 crore. Looking at market conditions, we may not go for a Qualified Institutional Placement (QIP). We are considering other options like Basel-III-compliant foreign currency bonds.
