Public sector lender Indian Bank, having achieved an all-round robust performance in the second quarter of the current fiscal, said it will be able to sustain the momentum going forward, supported by its advances portfolio growth that will cater to diverse segments in both retail and corporate sectors. S L Jain, managing director & chief executive officer, Indian Bank told Sajan C Kumar that the bank’s core income had increased significantly and it is poised to replicate the trend in the coming quarters. The bank will start its proposed operational subsidiary in another six months’ time as it is ready with the new company’s framework and is awaiting RBI’s approval. Edited excerpts:
How do you plan to maintain the momentum achieved in the second quarter?
The results we achieved in the second quarter are based on the business growth- both advances and deposit fronts. We are growing at 12% in advances, which has major segment of retail, followed by agriculture, MSME and corporate. If we take our performance in the last five quarters, we have been growing between 10% to 13% in overall advances. In the retail segment, the major growth driver is housing loan, which has around 60% of loan portfolio. To grow the pie, the bank has been consistently focusing on increasing the direct selling agent (DSA) tie-ups apart from having good number of housing projects approved by the bank in consultation with builders. In the case of auto loans, the bank has tied up with maximum number of original equipment manufacturer (OEMs). Besides, our interest rates are competitive and we have good delivery channel. To further the corporate advances, the bank has opened nine large corporate branches (LCBs) and 26 mid-corporate branches (MCBs).
What will be the focus areas for advances growth?
We are in a profitable growth phase, meaning we are not growing for the sake of it and we are taking a very prudent way. The big point here is that Indian Bank is a retail bank. If retail is growing, it means all the branches are capable of generating assets. In retail play, we have good margins, the risk is spread and the customer base also continues to grow as a result. In Q2, the retail, agri and MSME (RAM) advances grew overall by 12%. Out of it, retail, agri, MSME advances surged by 14%, 16% and 5%, respectively. RAM contribution to domestic advances was at 62% and rest being the corporate share. The bank will continue to maintain the same ratio, going forward. It may be noted that the bank’s net interest income had increased by 23% while its fee based income grew by 11% in Q2 due to robust advances growth.
What is the update on your plan to float an operational subsidiary?
The RBI had given us the in-principle approval. We have on-boarded consultant and already finalised article of association and memorandum of association by our board in the last meeting. We are now approaching the RBI seeking permission to start operations. This will be a new company and will do the back office operations and we expect this to go in stream in another six months. Initially to start with, we may recruit 100 to 200 people and this organisation will require a separate chairman and CEO. Once RBI’ green signal is secured we will go to RoC to get the name of the company approved. We have suggested three to four names for the proposed operational subsidiary.
What are your targets on recovery front?
In FY23, we had recovered `8,500 crore as against the slippage of `6,600 crore and in the first half of FY24, our recovery was to the tune of `4,200 crore as against the slippage of `3, 700 crore. We have been having the practice of recoveries more than of slippages, quarter over quarter, and we will be able continue the trend in the coming quarters as well. In Q2, out of `1,976 crore fresh slippage, around `570 crore was from corporate, consisting of two large accounts. Barring this, other corporate and MSME accounts that turned bad were negligible, which means that this could be considered as one off an incident and will not occur in the next quarter and all. We have also `23,000 crore worth NPA accounts due in NCLT in various stages of resolution process. The bank had received `1,029 crore through NCLT resolution in FY23 and in first half of FY24, we got `600 crore.
Any capital raising plans?
We have an approval from our board and shareholders to raise up to `4,000 crore this fiscal. We will approach the market any time from now. As of now, we are adequately capitalised with CRAR of 15.49%, but capital is always required for growth and we are a growing organisation. We will look at instruments like QIP, etc, among others. The bank is also required to adhere to the norm of 75% equiyt share by government by mid 2024. We need to dilute government’s 5% equity