Canara Bank is looking at a near 20% growth in business in FY15, says RK Dubey, chairman & managing director. In an interview with Vishwanath Nair, he talks about the status of the banking system, plans to manage bad assets and Canara Bank’s take on its insurance business. Excerpts:
Over the last few months, the central government has cleared a number of projects. Have they started making any impact?
The process of clearing of many new and stalled projects by the government is under way. In this financial year, these projects would hopefully become fully operational, resulting in higher investment and growth prospects for the economy.
There has been a trend of state-owned bankers reducing interest rates on loans to retain large corporate borrowers. Are you looking at such discounts currently? Are larger banks, with lower base rates, taking away business?
Interest rates are not reduced across the board just to retain large corporate clients. Interest rate on loans to corporate clients depends on cost of funds, the market situation and the larger macro picture. However, individual cases of reduction in rate of interest could be considered depending on the circumstances. In any case, no bank can lend to any corporate below its base rate.
We do not agree that large banks with lower base rates are taking away business because corporates decide to borrow from banks on the basis of their long-standing relationship with banks, financial requirements and the expected pricing of loan products.
What kind of growth is Canara Bank looking to achieve in the new financial year?
In FY14, the bank achieved a growth of over 20% in global business. In FY15, we plan to increase our branch tally to 6,000 from 4,755 as of now. We expect our business to grow in the range of 18-20% during the year.
Many banks are turning to asset reconstruction companies (ARCs) to offload NPAs off their books. What is Canara Bank?s plan?
We have offloaded NPAs to the extent of R1479.74 crore to ARCs during 2013-14 for a consideration of R1166.36 crore. We have reduced our NPAs substantially by way of sale of NPAs to ARCs and our gross NPA ratio is likely to reduce from 2.57% (as at March 2013) to below 2.5%, as at March 2014.
We also intend to continue the trend and reduce the NPAs by selling them to ARCs during 2014- 15 as well.
The finance ministry had directed state-owned banks to start moving toward the broking model for insurance. How do you plan on going ahead with this move? How do you plan on growing the insurance business?
Many of the member banks of Indian Banks? Association (IBA) had certain reservations related to the guidelines issued by the ministry of finance and RBI and the Insurance Regulatory Development Authority (Irda) on banks as insurance brokers. It was decided that an ad hoc committee, comprising bankers, RBI and Irda officials, be formed to revisit the guidelines.
Accordingly, the committee has been formed. It, however, is yet to submit its recommendations. After the fresh guidelines are issued, a road map shall be chalked out for Insurance business. However, currently, our strategies and action plan for insurance business for 2014-15 are based on the corporate agency model.