IDBI Bank is aiming at forming partnerships with fintechs for digital loans, connected banking and neo-banking services. Suresh Khatanhar, deputy managing director, tells Piyush Shukla that the lender is targeting to sustain high-teen year-on-year (YoY) loan growth and 5% YoY deposit growth in the next fiscal. However, with deposit rates continuing to rise, the net interest margin (NIM) is likely to contract from 4.59% during October-December to 3.50%-3.75% in the next fiscal. Excerpts:
What is your guidance on loans and deposit growth for FY24?
The current macroeconomic environment is characterised by uncertainties emerging from factors such as future inflation trajectory and interest rate tightening, as these may have bearing on advances and deposit growth. We are about to firm up plans and the growth momentum is expected to sustain.
Also read: Women prefer home over gold for investment, 36% looking for Rs 45-90 lakh worth housing property
What is your outlook on asset quality for the next fiscal?
The asset quality is expected to further improve. Our GNPA will also depend on transfer of large assets to National Asset Reconstruction Company (NARCL), but with a high provision coverage ratio, the net non-performing asset ratio is expected to be below 1.25%.
Also read: Women prefer home over gold for investment, 36% looking for Rs 45-90 lakh worth housing property
Will you continue to manage NIMs above 4.5% next fiscal or expect contraction?
The current regime of NIM is supported by the lag effect of a rise in repo rates and one-off income flows. With deposits rates being higher, the same would stabilise and accordingly could impact NIM to some extent. However, we are aiming NIM in the range of 3.50-3.75% for FY24.
What is the update on privatisation? Can we expect the exercise to be completed by the end of FY24?
The disinvestment process is being taken care of at the DIPAM level. It is already in the public domain that it has evinced good response during the expression of interest process. However, at our level, we are committed to improvement in top line and bottom line on a sustainable basis and increased resilience at the balance sheet to generate value for all stakeholders.
What is the co-lending and securitisation target for the next fiscal?
As a part of customer acquisition strategy, the bank is partnering with tested market players having proven business models and is expanding its footprints through such tie-ups. So far, the bank has already entered into tie-ups with six NBFCs. As far as securitisation is concerned, the same is being used to achieve regulatory targets under specific segment under the priority sector lending book. The bank has specialised vertical, which assesses the requirements. We are aiming to attain approximately Rs 200 crore during FY24.
Also read: MSME ministry invites tender to study export issues faced by MSMEs
Are there fintech partnerships in the pipeline?
The bank has progressed well in partnerships with fintechs, both for capacity building as well as for distribution partnership. So far, the bank has on-boarded fintechs in the area of lending, credit cards, customer acquisition, fast tag, CMS, AI/ML, and remittances. We are aiming to tie up with more fintechs in the areas of digital lending, connected banking, neo banking, etc. in the next financial year.
Will you raise capital in FY24?
We are maintaining CRAR (capital adequacy ratio) at 20%, including tier-1 capital at 17.60%, and there is a headroom for increasing our capital through AT1 (additional tier-I) bonds. So, our current capital structure is adequate to keep the growth momentum for at least next two years. However, we will continue to evaluate market dynamics for raising capital.