State-owned Dena Bank is currently on an expansion drive. The bank?s chairman & managing director DL Rawal, in an exclusive interview with FE?s Kumud Das, outlines his strategies to strengthen the nation-wide foothold of the bank. Excerpts:

Government has provided capital to some banks and you also need some for expanding your business. When do you expect the capital infusion from the government?

We didn?t get any amount during the recent capital infusion by the government as our capital adequacy ratio (CAR) under tier-I is at 8.16% and the bank who received the capital had their tier-I below 8%. We need a total of Rs 1,300 crore for our three-year business plan. We are likely to get Rs 600 crore in the form of equity on preferential basis for tier-I capital. Such a fund infusion will increase the government?s stake in my bank to 61% from 51.19%.

Then, we are expecting another sum of Rs 400 crore in the form of preference shares during 2011-12. The balance amount of Rs 300 crore will come in the same form during 2012-13. This entire capital infusion will take care of the bank?s credit growth at the rate of 24% for next three years.

There were some talks that your bank will be one of the first candidate for consolidation as government stake in your bank is at 51.19%…

Every bank has to play a very important role for the development of economy. We have stronghold in states like Gujarat, Maharashtra and Chhattisgarh. Like other banks, we are also participating in the development of agriculture, SME and financial inclusion (FI). In fact, Dena Bank is very close to people in its own way. Secondly, the government is infusing capital in my bank. So, I don?t think there is any plan to merge my bank with any other bank at the moment.

What are the bank?s growth projections for 20101-11?

My bank had witnessed a growth of 25% in agriculture, 22% each in retail and SME and 40% in infrastructure sectors during 2009-10. Accordingly, we have projected a growth of 16% in SME, 25% each in agriculture, SME and retail and 40-50% in the infrastructure sectors for the current fiscal. As on March 31, 2010, the share of MSME, agriculture and retail in my bank?s loan book was 16%, 14% and 15%, respectively, while infrastructure comprised 23% and the remaining by corporate loans .

However, we have increased our projection in each of these segments for the next couple of years. We want to increase the share of sectors like MSME, agriculture, retail and infrastructure to 18% each. Similarly, we want to increase our share of infrastructure sector too in our loan book over the same period.

We are also expanding our branch network in the north, west and the east, where we have low presence. We will be opening 80 branches in next three months in those parts. I would like to add here that 100% of our branches have already come under the core banking solutions platform.

What are the new initiatives you have taken to improve your performance?

We have recently undertaken specialised credit delivery channel under which we have opened corporate business branches in metros like Mumbai, Kolkata, Delhi and Chennai. These branches will be having business of more than Rs 25 crore. As sanctions are done fast at these specialised branches, quick decisions are also taken at the branch level also.

Secondly, we have opened specialised SME processing cells at regional level. We have opened 15 such cells, whereas six more cells are likely to start within next couple of months.

Have you decided on your base rate ?

In my view, the base rate of all the banks will be differing from one another in the range of 1% only. We will be taking a call on the base rate during our board meeting.

Do you see the interest rate rising soon?

There is some pressure on liquidity as credit offtake will increase. The government?s focus is on infrastructure. First you have to raise your deposit rates and then lending rates, too. Bulk deposits worth more than Rs 1 crore have already seen a rise in interest rate by 25-50 bps. But lending rates will take some time to rise, may be three to nine months from now. Even if RBI goes for rate hike in its policy announcement on July 27, it will not immediately replicate in the increase of lending rates.