Retail and SME will be our focus: JK Shivan, MD & CEO, Dhanlaxmi Bank

“Gold loans that had contracted this fiscal have started showing traction and we should be at March’21 levels by end of January 2022. The microfinance book is showing growth with new clients added. Retail and SME will be our focus going forward.”

Problems seem to be never-ending for Thrissur-based Dhanlaxmi Bank. Part-time chairman and independent director G Subramonia Iyer resigned from the board of directors this month. The board is engaged in a court battle with major shareholders and the lender reported a 74% Y-o-Y decline in its net profit to Rs 3.66 crore for the second quarter. JK Shivan, MD and CEO, talks to Rajesh Ravi on the lender’s performance and future outlook. Excerpts:

Review of the second quarter performance?
Total business has marginally grown YoY and there is improvement in CASA which stands at 34%. The cost of funds has significantly reduced to 4.70%. Low CD ratio is a concern contributing to lower income.

What is the outlook for the rest of the fiscal and guidance for the year?
The second half should be better as we are concentrating on business and income growth. Loan growth in our corporate well-rated book and vanilla retail has started showing traction. Gold loans that had contracted this fiscal have started showing traction and we should be at March’21 levels by end of January 2022. The microfinance book is showing growth with new clients added. Retail and SME will be our focus going forward.

Asset quality is seen on the lower side in Q2. What is your outlook on slippages in the second half?
The asset quality has improved quantum-wise from March levels, but as the loan book had contracted the impact was not evident. Both NPA and SMA figures will show improvement and we will achieve our year-end targets. No major slippages are expected but mandatory aging provisions will have to be made. Where security is available and restructuring prospects are slim, we will take coercive action.

Do you have a near-term and long-term plan for the revival of the bank?
Near term, the goal was to bring cohesion among top management, adopt processes and policies with single-point accountability for all activities and bring in a product, sales, and marketing culture. In the next phase of growth, we will be adopting more digital technologies, collaborating with fintechs to start with on the gold and credit card portfolios, and taking expert advice for the transformation

Are you satisfied with the progress the bank has achieved in your tenure?
I have taken over in very challenging times. In this limited time, excluding the four months lost due to lockdown, I have been able to address most critical issues and give direction to the executives. Long pending activities like promotions and fresh recruitment on a limited scale, improving the look, feel, and visibility of our public-facing offices have been done. We will move/refurbish at least 40 offices, mostly moving to areas with better access and lower floor space.

We have moved to our new corporate office and relocated and revamped some of our regional offices. We have put in place a dedicated sales and marketing team. Capacity building in credit underwriting is progressing. We will reach out to all stakeholders and share all these developments.

Any plans for raising capital?
We will discuss with the board the way forward for raising capital. The modalities will be framed after the deliberations.

What is the share of the gold loan to the total book and your outlook?
The gold portfolio was 26% of the book, which fell to 24% due to the double whammy of lower LTV and lower per-gram rate. We have tweaked our product offerings and are seeing traction from November onwards.

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