Kolkata-based Allahabad Bank is on an expansion drive. The bank?s CMD JP Dua speaks to FE?s Sitanshu Swain and Kumud Das about new initiatives and expansion plans. Excerpts:

Do you see rise in interest rates?

In case the marginal cost goes up, I may not pass it to the borrowers for now as the volumes will take care of the situation. For example, since the beginning of calculation of interest rate on saving bank account on daily basis, the banks are able to absorb it without passing it on to their borrowers despite the fact that it is coming as the a part of their costs. The overall operation has gone up. Volumes have also gone up. Every year, the banking industry is growing by 20% on an average. Allahabad bank has grown by 24% during the last fiscal. It?s cost to income ratio is at 38.83%, one of the lowest in the industry.

How are you planning to make Allahabad bank a pan-India bank?

We?ve already got pan-India presence. We are opening more branches in south and west. We?ve already opened 40 branches in past two months. And we?ll be opening other 40 branches in next couple of months. Our thrust is to open our branches in those areas where the bank?s visibility was comparatively less like south, west and Punjab & Haryana.

We will be approaching the RBI for another 150 licences for opening our branches so as to strengthen out pan India presence, We will be opening these branches by the end of the current fiscal. Also, we are opening 100 ATMs in next one year.

We are also taking advantage of liberalisation in the licensing policy of the RBI, under which banks are allowed to open their branches in areas having a population of less than 50,000, without obtaining any prior permission from the regulator

How are you planning to raise your CASA deposits?

We have recently kicked off a campaign for opening 15 lakh savings bank accounts until December. Bank?s CASA ratio stands at 34.5% and we plan to increase it to 36%.

Hike in CASA ratio will take care of bank?s net interest margin (NIM), too. As of now, my bank?s NIM stands at 3.10 %. We are looking at maintaining the NIM at 3% by the end of the fiscal. I do agree that we have moderated our projection of NIM for the current year . But then, it may go up also.

What is your view on deregulation of the savings bank?s interest rates?

Liberalisation doesn?t necessarily mean that the rates will go up. The interest rate has already gone up on such products since the beginning of the calculation of interest rates on daily basis. The total interest outgo has gone up by Rs 145 crore after the new system came into force. Bank?s margins have already taken a hit by 15 basis points. Competition will always be there.

What is your expansion plan?

We have projected to achieve our business level at Rs 2 lakh crore by December 2010 and Rs 2,20,000 crore by year -end. Right now, our business is at Rs 1.85 lakh crore.

How do see your credit offtake during the year?

Allahabad bank?s credit growth was at 26-27% on y-o-y basis in September. I have projected a target of 25% credit growth by the fiscal-end. There is a demand from infrastructure, retail and all other sectors.

The bank?s total infra exposure currently stands at 18% as on June 30, 2010. It was at Rs 13, 868 crore, which showed a growth of 34.39% over the same period of the last fiscal (Rs 10,319 crore). The figure includes the exposure to the sectors like power (Rs 8,467 crore), telecom (Rs 1740 crore) and road & port (Rs 2121 crore). Retail lending currently comprises 14%.of the total lending.

How do you see non-performing assets (NPA)?

The bank?s gross NPA is currently at 1.50% and net NPA stands at 0.41%. However, the slippage ratio has gone down to 0.66%. We have projected to achieve gross NPA of 1.75%. We are planning to sell old sticky loans to asset reconstruction companies if we get good rates.

What are your overseas plans?

We have already got a branch at Hong Kong, which is doing well. We have approached RBI for opening a branch in Shanghai, Hong Kong and an office in Dhaka.

Once we get approval and open the office in Dhaka, we will upgrade it to a branch within six months of operation. We are doing a business of Rs 1,700-1,800 crore through our branch in Hong Kong, where we have started our operations merely three years ago.

What are your hiring plans?

We have recruited 2,000 staff, including 1,000 officers, during last fiscal. The idea was to take care of retirement happening within the bank and the attrition and finally meeting the needs my bank?s expansion plan too.

We have recruited 110 agricultural officers on scale I and scale II. In addition, we are also recruiting law specialists, IT professionals and charted accountants. Recruitment is cost neutral as on date for the bank.

We have given career path to our entire staff and we have introduced fast track promotions at the bank. Ten years back, it used to take 16-18 years for an officer to become an assistant general manager (AGM), now he can aspire to get that position within 14 years of service only. Currently, we have got 20,000 employees with us.