Retail lending activities offer tremendous potential: PK Vijayakumar, member of COD, Dhanlaxmi Bank

Kerala-based Dhanlaxmi bank is now managed by a committee of directors (COD) after shareholders voted out its managing director and CEO in October 2020. G Subramania Iyer is the chairman of the COD , PK Vijayakumar and G Rajagopalan Nair are the other members. PK Vijayakumar talks to Rajesh Ravi on the bank’s performance and future outlook.

Dhanlaxmi bank has seen two of its MD and CEO resign before the end of their tenure. What is the board’s take about this and what is the status of the selection of the new MD and CEO ?
No comments are offered on the reasons for the exit of two MDs as it is a thing of the past and the bank wants to move forward instead of doing a post-mortem on happenings of the past.

The bank received more than 100 applications and we have constituted an external committee for the selection process. It is learned that by January 2021 the bank will have the new managing director on board. We are also planning to strengthen the team by recruiting a general manager to the team and implement a succession plan for the future.

What is the highlight of the second quarter?
Bank registered a net profit of Rs 14 crore in Q2 compared to Rs 6 crore in Q1.Total business stands at Rs 18,496 crore,a growth of 3.64% from Q1. Deposits recorded growth of 2.94%,while CASA grew by 6.98%. Gross NPA came down by 70 bps to 6.36% and Net NPA stands at 1.66%.

What is the net interest margin for the quarter and going forward what is the guidance on NIM?
Net Interest Margin (NIM) as on 30th September was 2.88%. We are targeting a NIM of above 3% by March 2021.

How many customers availed the benefit of the moratorium ?
Over 15,000 customers availed the benefit of the moratorium.

What is the slippage for the quarter and what would have been the slippage if not for the moratorium ? How much is the restructuring demand? What is the provision coverage ratio?
Slippages for the quarter ended September 20 were Rs 5.27 crore. It would have been about Rs 50 crore if the RBI’s moratorium benefits were not there. At present we are having demand for restructuring from very few customers. However, in the coming days we anticipate restructuring of a few more accounts in view of Covid-19 situation. The bank is having a provision coverage ratio (PCR) of 89.32%.

On the liability side, retail and corporate advances are showing growth. What is your outlook on credit demand?
Indian economic activity gradually moved past the worst and is showing signs of resumption in activities. The bright spot in this otherwise bleak scenario is an upbeat rural India. A good monsoon holds the promise of a good Kharif crop. The government has announced several key reform measures. The disposable income levels are rising, aspirations are rising and consumption is going up. Retail lending activities are showing growth and offer tremendous potential. Retail (including gold loans) & SME segment will continue to be the priority of our Bank. However, we are also exploring avenues for growth in corporate lending as well with certain caps and restrictions.

How big is the gold loan book of Dhanlaxmi and what is the share of gold to the total loan book?
Dhanlaxmi is having a gold loan portfolio of Rs 1,646 crore as of September 30, 2020 , a growth of 42% year-on-year from Rs 1,159 crore. Gold loan constitutes 23% of the total loan book.

What about low-cost NRI deposits? What is guidance on the cost of funds? Any plans to raise capital?
Bank’s NRE deposit portfolio size was Rs 1,846 crore which is 16% of the total deposit. Our cost of funds is 5.54% compared to 5.69% a year ago. We are targeting more CASA and thus bring down the cost of funds further.

The AGM has given consent for increasing the share capital by Rs 100 crore and also raising capital up to that level.Bank has a reasonably healthy CRAR of 13.72% as on September 30, 2020.We shall be raising the capital based on the requirements and assessing the profits of FY21.