Domestic banks are making efforts to adjust with a host of new developments in the domestic and?global economies. Canara Bank CMD S Raman speaks to FE’s Kumud Das about his strategies to guard bank’s performance in this dynamic situation.
Where do you see the interest rates heading ?
It all depends on the inflation and GDP growth prospects. Though government has projected country’s GDP growth at 8%, experts believe that it may be at 7.5%. The problem is on global economy front due to sovereign credit crisis in Europe and the debt crisis in US. The Reserve Bank of India will have to keep both domestic and international economy in mind when it reviews its annual monetary policy on September 16.
I think, domestic conditions point to an increase in the interest rates by 25 basis points. But, the RBI could also consider pause in rate hike. It will alo depend on the liquidity condition. We will take a fresh call on these issues when the credit starts picking up in the third quarter.
How do you see your net interest margin(NIM)?
It is under pressure. We had achieved an NIM of 2.4% in the first quarter. After considering the development where there will be a shifting towards auto generated NPA of loans up to R2 lakh, it will definitely affect our NIM during the current quarter. Still, we are quite hopeful of achieving an NIM of 2.8-2.9% by the fiscal-end.
Are you revising your credit growth target for the year?
Currently, bank?s credit growth is at 18%. We have not revised our credit growth projections for the current fiscal. It will depend on our performance during the current quarter. Bank?s deposit is growing at 17-18%.
In which segment the credit off take is happening?
When it comes to our corporate credit, we have got no dependance on any particular sector. Our infrastructure portfolio is very strong as our net NPA was zero there. Our retail sector is okay.
Currently, corporate loans comprise 30% of our entire loan book. Our retail creditis also growing well.
How do you see NPA and recovery plans of your bank?
There are some sectors which have seen signs of stress. We have received some requests from our borrowers for the restructuring of their accounts. Our net NPA was currently at 1.36%. We would like to maintain it at the same level by the end of the fiscal, too. When it comes to migration to the system-generated risk, we have already completed the exercise in case of all kinds of accounts as on July 31. It will help our bank staff in many ways to track the accounts. We have already recovered the NPA amounting to R750 crore as on June 30 compared to the full recovery of R2,000 crore during the last fiscal.
There is no stress on education loans. The bank’s outstanding education loan as of now is at R3,500 crore. Our NPA in this segment at the moment is at 5-6%.
Do you have any capital infusion plan?
We have got a capital adequacy ratio (CAR) of 13.37%. Our CAR as per Basel-I and Basel-II was at 10.7% and 10.17%, respectively. We have received a sum of R1,993 crore from the government during the fourth quarter of the last fiscal in the form of government equity. Currently, government holds an equity of 67% in the bank.
Will Canara Bank slow down expansion plans on lower ecomomic growth?
We have already opened 80 branches during the current fiscal so far. We are planning to open 250 more branches during the remaining part of the fiscal. As much as 60% of the new branches will be opened in rural and semi-urban areas. We find good business opportunities in the rural areas.
On the headcount front, we have already recruited 3,000 staff during the last fiscal. We will be recruiting 1,500 more staff during the current fiscal. We have got 3,333 branches and 44,000 employees as of now. We are likely to add another 1,500 ATMs to the existing 2,500 by the end of the fiscal.
