Syndicate Bank would like to go an expansion drive, but is refraining from forcing the pace in a difficult environment. The bank?s gross NPA ratio at the end of the third quarter stood at just 2.8%. Sudhir Kumar Jain, chairman & managing director, talks to Shashidhar KJ on how the bank has managed to maintain asset quality with a two-pronged strategy of focusing on both large and small accounts by holding lok adalats. Excerpts:
Syndicate Bank has done well to keep gross NPAs at 2.8% of the total advances….
We have a two-pronged strategy for asset quality ? attacking the small as well as the larger accounts. Our lok adalats to tackle smaller accounts ? we typically hold four adalats across branches over the year ? have worked well.
Spot recoveries from the four adalats have been about R171 crore, with a total one-time settlement of R540 crore. As for larger accounts, we keep track of all accounts that are overdue over 30 days for loans above R1 crore.
Through video conferencing on a fortnightly basis, we have meetings with GMs to work out strategies and share them with the regional offices. For accounts smaller than R1 crore, regional offices monitor them and follow up with the branches.
Our slippages were higher in Q2 at R1,700 crore, but these comprise some large accounts. In Q3, we were able to control slippages to about R670 crore, so that’s substantially smaller. We?re growing in a conservative fashion, not forcing the pace but trying to stabilise asset quality.
Which areas are you looking to lend to?
We have actually changed our focus, it?s now on the retail space and MSME (micro, small and medium enterprises), where we’re concentrating more on medium enterprises. Syndicate Bank lacked focus in medium enterprise lending; so, we?re creating specialised mid-corporate branches and, by end of April, there will be 10-12 branches exclusively doing mid-corporate business, which we define as between R5 crore and R200 crore. As for the retail space, we are into home loans and have created a list of 800 approved builders, set up 17 central processing centres and come out with a few schemes. Our retail portfolio is R20,530 crore, about 13% of the loan book, and this could go up to 14% next year, a growth of about 20-22%.
What about lending to large corporates?
There are challenges in lending to large corporates, given there is no fresh demand, but, right now, we are taking care of our existing customers who may need some support. We are being selective and we don?t intend to be aggressive for the next six months. After that, depending on the economic scenario, we may review our stance.
Could you give us some colour on Syndicate Bank?s expansion plans?
We have already opened 217 branches this year ? 134 in rural and semi-urban areas ? and, by March end, we should have added 250 branches. Next year, we plan to open about 300 branches. Our focus is Gujarat where we have just one regional office, but where we feel there is potential. So, we want to add at least 30-40 branches in Gujarat and also have another regional office. We are also looking at Chennai ? although we are a south-based bank, we don?t have a big presence in Chennai.
How is the bank placed with respect to capital adequacy given the expansion plans?
As of December, our Tier-1 ratio was 8.31% and, so, we are comfortable. According to our calculation, to meet the Basel-III norms, even if we grow at about 18% CAGR for the next four years, we have adequate capital for Tier-1 and common equity capital. There will be some issue with regards to Tier-2 capital, but we have headroom. We can raise Basel-III-compliant bonds whenever we are required to. The government has given us R200-crore capital and we have asked the board to approve a QIP (qualified institutional placement) for R200 crore, after which the government?s shareholding will remain at the current level at about 66%. We also have approval to raise Tier-2 bonds of R1,500 crore, but are waiting for the right time as the yields are quite high. There is no pressure on the bank as such, this is only to maintain the bank?s CAR at about 12%.
Does Syndicate Bank plan to sell stressed assets?
We have identified some 10-12 accounts worth about R350 crore, but we are not sure we can sell these soon. But yes, going forward, in 2014-15, we are planning to sell assets of R1,000-1,500 crore and we will start the process from April itself. In 5-6 months, we may get a reasonable value from them.
The bank has taken several initiatives in the rural banking space.
We operate in rural areas, both through brick-and-mortar branches as also with the help of business correspondents (BCs). While we facing some staff hurdles, we are going to recruit around 2,700 officers to work in rural areas. Of these, 700 will be specialised officers and about 550 will be agriculture officers. While the BCs are functioning, we need to support and supervise them.
