How did the bank fare in FY14, considering the tough external conditions
IOBs gross NPAs rose to 5.27% in December 2013 against 4.13% in the year-ago period. We expect a possible decline in the NPA levels for Q4FY14. However, as fas as return on assets (ROA) are concerned, the major constraints are incremental NPAs and interest reversal on restructured advances. Our total provisions were very high at 85.15% of the total operating profit during FY13, which limited our ROA to 0.24% despite all-out efforts to cut NPAs.
What steps are you taking to contain NPAs
The problem of NPAs is related to several internal and external factors. The internal factors include diversion of funds for expansion, diversification, promoting associate concerns, cost/time over-runs during project implementation, inefficient management, strained labour relations and technical problems, among others.
External factors include global recession, power shortage, natural calamities, and so on. The asset quality of PSBs, in general, is impaired due to significant exposure to troubled sectors like power, steel, aviation, real estate and telecom. It is our objective to keep NPAs as low as possible. For that, NPAs are monitored at all levels, including the top management of the bank and ministry of finance.
Are you satisfied with the current rate of growth What are your network expansion plans
In FY14, the bank opened 363 branches. The overall Casa percentage of all new branches is well above 40%. The bank has opened around 37 lakh Casa accounts through intensive campaigns held throughout the year. We can expect an increase in Casa deposits only over a period of time, say, 2-3 years.
Hence, our Casa rate is expected to increase uniformly. We plan to open 400 new branches covering more rural and semi urban areas this fiscal. Accordingly, new recruitment would be made to meet the requirements.
Will there be any capital-raising in FY15
During FY14, we raised R1,200 crore from the government, which holds 73.80% in the bank, and R396.04 crore from LIC, which now holds a 14.77% stake. As fas ar medium-term notes (MTNs) are concerned, there are a host of regulatory restrictions on credit growth at our Singapore and Hong Kong branches. The bank will go in for an MTN issue when such a need arises, subject to market conditions. During FY15, the bank may need capital of around R2,500 crore and will explore various possibilities of raising the amount.
We would also examine the option of going in for Basel-III compliant Tier-I bonds in international markets, depending on investor appetite and cost of such bonds.
What would be the business focus in the new fiscal
As we expect the economy to be more positive during the current fiscal, it is likely that the system would post a growth of 16% in deposits and 18% in advances. We expect our Casa to grow further to 27% and retail lending at a higher rate of, say, 20%. At present, our business is around R4,08,000 crore with the system share of 2.7%. We will aim for a business of R4,75,000 crore in the new fiscal with a growth of 16%.