Indian Bank sees strong lending opportunities in the MSME, retail and agriculture segments, while maintaining a sharp focus on profitability. Binod Kumar, MD and CEO, tells Kshipra Petkar the bank also plans to mobilise $2 billion through FCNR(B) deposits and the ECB route by the end of September. Excerpts:
Your loan growth guidance of 11-13% appears conservative despite stronger Q1 growth. Why?
Growth is important, but it should not come at the cost of profitability. We want to protect our return on assets (ROA), net interest margin (NIM) and, ultimately, earnings rather than chase growth aggressively.
Which business segments will drive loan growth?
We are seeing opportunities across MSME, retail and agriculture. Agriculture growth was temporarily subdued due to the implementation of the RBI’s revised gold loan guidelines, but we expect it to recover to around 15-16% this quarter.
Are you worried about monsoon-related stress in the agriculture portfolio?
Not particularly. A large part of our agriculture portfolio comprises jewel loans, while crop loans account for only about Rs 17,000 crore. At present, we are not seeing any meaningful stress in that portfolio.
The RBI’s relaxation on FCNR(B) deposit norms has prompted banks to step up mobilisation. How has Indian Bank fared so far, and what is your target?
We have mobilised around $140 million through FCNR(B) deposits so far. Our target is to raise about $2 billion by the end of September. We are also evaluating external commercial borrowings (ECBs), depending on which funding source is more attractive, but the overall objective remains around $2 billion. We are leveraging our GIFT City and Singapore operations, with most traction coming from NRIs based in the UAE and Singapore.
The bank has created an additional Rs 1,000 crore provision towards the expected credit loss (ECL) framework. What does this indicate about asset quality?
This is primarily to ensure a smooth transition to the ECL regime rather than reflecting any deterioration in asset quality. We estimate the total impact at around Rs 3,000-3,500 crore and intend to front-load the provisioning instead of spreading it over four years.
How much is the bank investing in technology and what are the priorities?
We invest around Rs 2,000 crore annually in technology and cybersecurity. If required, we are open to increasing this budget. We are also working aggressively on AI initiatives and expect to launch conversational AI shortly, enabling customers to carry out banking transactions through voice commands on mobile and internet banking platforms.
What is the strategy to improve CASA?
Our focus is on relationship banking, salary accounts and float balances. We have converted 17 lakh inoperative accounts into operative accounts, which has brought in about Rs 1,469 crore. We are also expanding salary accounts and providing fintech-based payment solutions to government departments to generate float. The average savings account balance has almost doubled over the past year.
What is the progress on your proposed wealth management business?
We expect to set up a dedicated wealth management vertical in the second half of FY27 after obtaining the necessary approvals. Initially, we will hire talent from the market, while the possibility of a joint venture can be explored at a later stage.
What are the bank’s top priorities for FY27?
Our three key priorities are: raising CASA to over 40%, increasing the share of digital business, and driving cross-selling by improving the number of products per customer.
Given the changing interest rate environment, do you see scope to revise your NIM guidance?
The current guidance was framed when bulk deposit rates were much higher. We have performed better than our guidance so far, and we will review the outlook after the second quarter before deciding whether any revision is warranted.