Indian Overseas Bank (IOB) is focusing on on-boarding as many as customers so that its current account savings account(CASA) front grows significantly. The bank is also looking at aggressive recovery and expects to achieve a gross NPA level of below 5% by the March 2024- end. Ajay Kumar Srivastava, MD & CEO, IOB tells FE’s Sajan C Kumar that the bank is currently well capitalised and would not require growth capital for the next one year. He says that the bank is looking to achieve an overall credit growth of 13% to 14% for FY24. Excerpts:
Q: How do you rate yout first quarter performance?
A: The operational efficiency of the bank has increased tremendously. Apart from the increase in interest income and non-interest income, good recovery from the written-off accounts in the first quarter helped the bank achieve profitability. Plus, we have been able control our expenses to a certain extent. Accordingly, we have got the cushion to be able to provide for future migration of accounts, in this quarter itself which is why the provisioning towards bad assets had risen this quarter.
Q: What are the plans recovery and improving asset quality?
A: We are looking to bring down the gross NPA level to below 5% by the end of March 2024 from the current 7.13%. We have next three quarters and quarter by quarter, there will be reduction. Overall, the banks has Rs 29,000 crore in the written-off accounts. Out of it, we have Rs 25,000 crore worth of accounts before NCLTs to be recovered. Other than NCLTs, we have identified 178 accounts worth Rs 14,000 crore to be sold through ARCs this year. Many ARCs have shown interest and we are actively working with them to seal the deal. Besides, we are looking at other recovery avenues such as one-time settlement and upgradation of certain accounts.
Q: What is the credit outlook for FY24?
A: We would like to maintain the lending mix of 65: 35 between RAM (retail, agri and MSME) and corporate. We are not going to neglect the corporate sector, that will also happen and medium industries will be in focus. In retail, we will be focusing on housing and jewel loan segments. We have Rs 39,000 crore jewel loan portfolio and in the last four years, we have grown this portfolio by 3.5 times. In MSME sector, we will look at the middle segment (units worth between Rs 50 crore to Rs 100 crore). It has come to our notice that many state government PSU are in need of funds and we are going to lend them. We are also focusing on the central government undertakings. Another area will be those manufacturing areas which will be helped by government through incentives. So, ideally, we would like to have a credit growth of 13% to 14% for FY24.
Q. How well capitalised is the bank?
A: Our CRAR increased from 16.10% to 16.56% during the quarter. We are well-capitalised. With the growth that we are seeing, we are well-positioned to handle more than one year of growth. For credit growth or growth capital, we don’t need any funds at present. Howevr, we have already obtained board clearance for raising capital to the tune of Rs 2,000 crore. As and when the market condition becomes conducive and we get good valuation, we may think about raising capital later.
Q: What is the exposure of the bank to NBFCs ? Is the bank being more cautious while lending to NBFCs, especially to the lower rated ones?
A: Our NBFC portfolio is hardly around Rs 10,000 crore, much below the cap. We have huge cushion in NBFC lending , but still we are not going for that. We are going to do funding to those NBFCs with whome we have business relationships already. Also, we are looking at some good retail NBFCs, with good ratings. We are going to be very selective.
Q: Any plans to ramp up the bank’s oversess footprint?
A: We have four overseas branches in places such as Singapore, Bangkok, Hong Kong and Columbo. As we have to abide by the rules of the country, we have been very selective in overseas lending. We are giving loans to good-rated clients only, mostly to whom we had past exposure. In last two years or so all these centres have started giving good results. In Q1, they had contributed Rs 50 crore. All these centres have been operating since more than 40 years.