'We hope to grow the retail piece faster'

Written by fe Bureau | Updated: Mar 30 2011, 07:46am hrs
J&K Bank has been growing profitably over the last few years and hopes to grow its balance sheet to Rs 1 lakh crore by March 2013. Chairman and CEO Mushtaq Ahmad tells Financial Express the bank will continue to focus on J&K lending half the incremental credit within the state, and try to earn better yields by lending more to SMEs.

What is the banks growth strategy for the next few years

We hope to see credit growth across all sectors and better our profitability as also improve treasury yields. We aim to manage our liabilities more efficiently and increase CASA by expanding the branch network both in and outside J&K. The composition of assets will continue to be diversified and change in terms of geography, size and sector of lending and from corporate lending to SMEs with better yields.

How fast do you plan to grow the balance sheet

We expect to close this year with a balance sheet of Rs 70,000 crore and grow it to Rs 1 lakh crore and a net profit of Rs1,000 crore by March 2013.

J&K Banks loan book is now more or less equally split between J&K and the rest of India. Do you see this ratio changing

The bank will continue to focus on J&K for credit disbursal and we will try to deploy half of the incremental credit in the state where yields are relatively higher and scope for lending to tourism, SMEs, horticulture has increased with the return of normalcy. Consequent to repayments of the Overdraft (Ways & Means) facility by the J & K government, the ratio may vary for this year but we are seriously trying to maintain it.

Retail loans have a relatively smaller share, except in J&K. Do you plan to expand the retail business elsewhere

We hope to achieve our targets through a mix of low-volume, high-margin business within J&K and high-volume, moderate-margin business in the rest of the country. The retail business as a percentage of total business, in the rest of the country, is comparatively lower but we are putting in efforts to grow it.

How do you plan to grow CASA from current levels of around 38%

Our CASA ratio has improved over the years, reflecting a change in the deposit mix. We are going to provide banking services in all unbanked areas of the J&K State using both the brick & mortar and business correspondent models, through a network of more than 1,100 Common Service Centres. This would bring in a vast segment of the unbanked population within the banks fold and help grow CASA during next two years.

The banks cost to income ratio has come down sharply over the years to around to just over 37%. Is there scope for bringing this down further

Initiatives being taken to achieve higher productivity and optimum use of technology are expected to result in reduction of cost to income ratio to 35% by March 2013.

Since interest rates are rising, yields too will go up. Will the bank be able to maintain its net interest margins which are currently very high

Higher lending rates, which may be necessitated by the increase in the cost of funds, with a mix of efficient liability management, is expected not only to protect the margins at current levels but also result in increase in the net interest margin (NIM) from 3.7% to 4%. The current trend of hardening of deposit as well as lending rates is expected to ease in next financial year with controlled inflation of commodity prices in general and food prices in particular.

Does the bank plan to raise capital in the near future

The Bank is well capitalised with CAR of 15.49% and the Tier-I capital stands at 12.80% while Tier-II is at 2.69%. There are no immediate plans to raise additional capital.