?We will broad base our advance portfolio, with a retail bias?

Vijaya Bank, which has recently joined the league of big banks with an aggregate business of over Rs 1,00,000 crore, expects a 20% surge in its lending portfolio this year. In an interview with FE?s Debojyoti Ghosh, the Bangalore-headquartered bank?s chairman and managing director Albert Tauro talks about the bank?s new initiatives and the challenges ahead.

After a lull, banks have begun to grow their loan portfolios. Has there been a recovery in credit demand for Vijaya Bank?

Yes, credit demand did show signs of recovery in the fourth quarter as with the banking industry. As of March 2010, our credit growth year-on-year was over 17% while deposit growth was about 14%. The small gap is largely on the significant volume of maturing wholesale deposits and our conscious decision to shift towards retail core deposits. Our lending portfolio as of March 2010 was about Rs 42,000 crore, which translates into a credit-deposit ratio of 68%, a percentage point higher compared to March 2009.

How do you see the credit growth, going forward?

We expect the growth momentum in 2010-11 to continue post-second quarter, as historically the first quarter is a lean period. We expect a minimum 18-20% growth in credit for the financial year, given the volume of sanctions on hand and the economy?s growth prospects. We have also plans to broad base our advance portfolio, with a retail bias.

How has the downturn impacted your retail portfolio?

We didn?t do too well in the retail space in the just concluded financial year. This was almost in keeping with the industry trend in the post-meltdown phase. However, certain initiatives we have taken in the last few quarters are likely to pay off in the current financial year. These initiatives include the strengthening of our centralised retail assets processing centres, a close monitoring of the turnaround time in retail proposals, forging alliances with auto majors, setting competitive interest rates and terms and simplification of systems and procedures.

In the last few quarters, your NPA management was under pressure. What is the current status? How are you planning to handle it?

Our asset quality in general is well managed, but for a few accounts that slipped for reasons beyond our control. However, our peak level of NPAs is behind us. The NPA levels have been progressively declining from September 2009, and I expect the trend to continue in March 2010 and beyond. I see things getting only better. To contain the NPA level, we have strengthened our loan review mechanisms, and are closely monitoring stressed accounts, especially those that were restructured recently. We have also reinvigorated our recovery mechanism through legal provisions.

How will you rate the fourth quarter results?

Our overall operations were quite satisfactory during the fourth quarter. Our efforts in the core business areas also yielded results, as we could achieve one of the highest growth rates in savings bank volumes, which crossed the Rs 10,000-crore mark. Our focus on a calibrated exit from the bulk business also made good headway, as we improved the share of retail business on both sides of the book. Good growth in the core business has boosted our earnings profile in the fourth quarter, as in the past several quarters.

What areas of growth are you focusing on in the coming quarters?

Our major focus will continue to be on the core business, with our IT capabilities as a major strength in terms of business facilitation, alternative delivery channels and, more importantly, drawing the young, tech-savvy clients to our fold. Within the core, the retail business and goals under financial inclusion will receive major focus.

How do you see the Indian banking sector performing this year? What will be Vijaya Bank?s major challenges this financial year?

Prospects are quite upbeat for the Indian banking sector this year. The key driver of growth will be the realty sector that is seeing a consolidation of the recovery process. Already, we are seeing a resurgence in the industrial and export sectors.

With regards to challenges for the bank, there are quite a few. The first major challenge for us is to fully leverage our IT capabilities and IT-backed alternative delivery channels. Further, for extraneous reasons, we have not been able to capitalise the potential in the third party business like insurance and mutual fund.