A pick up in the credit demand is crucial for Bank of India to cut its base rate and a cut in the repo rate by RBI alone would not result in base rate cuts, says VR Iyer, the chairperson and managing director, Bank of India. Speaking with FE’s Aparna Iyer and Bhavik Nair, Iyer says that in the first nine months, loans disbursals have been flat. Excerpts:
When do you see credit growth picking up reasonably?
I think it would take at least two quarters for credit to reasonably pick up. There are no sanctions happening. Disbursals are flat and this is mostly for refinancing. Our retail growth is 20-30%, which is where the loan growth is really coming from. And international loan book is growing. Corporate loan disbursals were just Rs 1,000 crore in the last nine months, it has been flat.
When can we expect a cut in the base rate?
We have already cut rates on deposits. Cost of fund has come down already but there is no credit demand. Credit has to pick up because we need income to even make provisions. A rate cut by RBI alone would not matter because we are not borrowers in the short-term money market. We will cut sooner than later, that’s what I can say.
How much does overseas branches contribute to the bank’s revenue?
About 30% of business and 20% of the profit comes from overseas branches. Entire loan growth is only from overseas branches because domestic corporate loan growth is flat.
Any fund raising plans from the offshore market?
At present we do not have any plans, it would depend on our overseas operations. We would soon open a branch in Dubai, we have all the permissions for it.
Topics discussed at Gyan Sangham were consolidation and capital. What are your views?
The big challenge for PSBs on capital is that we lend to infrastructure extensively. The government has to take a call. I must have a facilitating environment for raising capital for Basel-III if the government is not able to provide capital. We have to think of non-conventional tools like differential voting rights, monetisation of assets and so on, because the government cannot dilute its stake.
Is it beneficial for PSBs to tie up with telecom companies for setting up payment banks?
PSBs are not present everywhere as there are many unbanked areas. Telecom companies have the technology background, mobile banking will catch up fast. People who do not have bank account know how to operate a mobile. We may not be able to reach every village through mobile banking ourselves. I think all banks will co-exist. We are good in cash management and well stabilised in risk management. But a telecom company will not know all this. So, there has to be a marriage between banks and telecom companies.
What is happening on the Jan Dhan Yojana front?
Jan Dhan Yojana accounts are opened through all channels, be it branches, business correspondents or others. Many of the accounts are non-operative today but the direct benefit transfer will increase transactions. We are not worried about the overdraft facility because it will be given only after six months. PSBs have opened about 30 crore accounts and have a balance of Rs 8,000 crore but private banks have opened only 28 lakh accounts. Bank of India has a balance of about Rs 1,400 crores.
What after April once the forebearance on restructuring ends?
Whatever has to be restructured has already been done so. From now on, it would be small accounts and not major hit.