The Covid-19 crisis struck in the middle of the process to merge Allahabad Bank with Indian Bank, forcing us to bring to bear all the experience and skills one had acquired over the years. For this expertise, I would like to thank SBI and Indian Bank which served as my training ground.
While the amalgamation with Allahabad Bank proved a challenging exercise, the combined entity is ready to make the most of its pan-India presence and better reach, Padmaja Chunduru, MD & CEO, Indian Bank, tells Sajan C Kumar. Excerpts:
How challenging has the process of merger with Allahabad Bank been, especially in the midst of the pandemic?
The Covid-19 crisis struck in the middle of the process to merge Allahabad Bank with Indian Bank, forcing us to bring to bear all the experience and skills one had acquired over the years. For this expertise, I would like to thank SBI and Indian Bank which served as my training ground. We could not have shifted or transferred people that the amalgamation process called for at the time of a public crisis. IT integration was another challenge. If we could go through with the exercise, it was only because of continuous communication between the banks. Planning is one thing, but execution is quite another. You need to keep checking whether everything is happening as per the plan.
What are your priorities for overall credit growth and business generation in FY22?
With the merger process executed successfully, we have a pan-India presence and that makes us much more confident about our prospects. We now have a solid presence and will gain from better customer-connect, a higher number of branches, internet and mobile banking, and, most important, business correspondents (BCs) providing us at least 20,000 touch points.
I think Indian Bank is poised to take advantage of the position it is in now. There has been steady growth in our business in the first three quarters of FY21 and the NPA numbers are on a downward trajectory. We have a RAM (retail, agriculture and MSME) portfolio of 56% and a corporate portfolio of 44%, which makes for a good mix. There’s enough scope to improve in any of these segments, though, with the combined balance sheet providing us adequate exposure to well-rated companies, the corporate side is stronger.
What would your lending strategy be? While RAM makes for the larger chunk now, is there any plan to grow the corporate share?
We have positioned the bank to take advantage of corporate lending opportunities, both funded and non-funded, setting up 14 large corporate branches and 38 mid-corporate branches. We have taken working capital consortium membership and term loans to well-rated and well-known corporate houses. We expect to grow the corporate portfolio by 12% in the next fiscal. In Q3 of this fiscal, we could grow the corporate pie by 7% as business was subdued. We have also carved out a mid-corporate vertical to focus on the Rs 150- 500 crore segment. In corporate lending, one has to select wisely. The credentials of the promoter are important while granting a corporate loan. In the RAM segment, where we are the market leader, we expect to grow by 12-14% in the next fiscal.
Having a tight leash on NPAs and putting in place a strong recovery process is critical these days. What are your plans on these fronts?
Arresting slippages and going full throttle on recoveries have been part of the bank’s DNA. In the two-and-a-half years I have been with the bank, slippages have been brought down quarter by quarter. For recovery, we have two teams, one working from Chennai and the other out of Kolkata. We hope to recover Rs2,000 crore without NCLT and after taking that process into account, the figure will be around Rs 4,500 crore by the end of this year. We are also conducting e-auctions of real estate properties and other recoveries under the Sarfaesi Act and the exercise is gaining traction gradually. We are also going back to door-to-door visits by general manager-level officials to recover smaller loans. This is a sort of name-and-shame strategy to pressure defaulters to clear their dues.
What is your current capital adequacy ratio? Are there any plans to raise capital?
The capital adequacy ratio for the December quarter was at 14.16% and even if you factor in the NPAs of the standstill period, it would come down by only 10-15 bps. Moreover, this does not include the Rs 2,000 crore we had raised in January 2021. If that is included, it will go beyond 14%. We are doing two things now.
One, we are watching our asset portfolio to assess the risk-weighted assets and that is being optimised or controlled accordingly. Two, we have raised Rs 4,000 crore and the board has approved further capital raise of around Rs 4,000 crore through QIP, FPO or other means. We hope that the share price of the bank will soon touch its book value and we will be able to go for the capital raise by the first quarter of the next fiscal.