‘Will focus on refinancing well-rated corporates where cash flows are strong’

Indian Bank is looking at diversifying loan growth across sectors and geographies by targeting manufacturing, service and infrastructure companies with good rating. It will also focus on refinancing of well-rated corporates where cash flows are strong. In an interview with FE’s Sajan C Kumar, Indian Bank MD & CEO, Padmaja Chunduru said the bank proposes to concentrate on industries with low and moderate risk due to the Covid impact. Excerpts:

The bank recently raised funds bonds. What was it for?

Bonds totalling Rs 1,608 crore were raised for augmenting the AT-1 capital and overall capital adequacy. During FY21, out of existing tier 1/tier 2 bonds, Rs 1,000 crore was repaid on maturity or exercise of call option and further there is a call option due in March 2021 for Rs 500 crore. There will be no additional interest burden as these bonds mainly replace the ones paid out during the year. Currently, we have no plan to raise equity capital from the Centre or financial institutions. For raising equity through QIP or FPO, the bank will take a call based on the market scenario and requirement.

Due to pandemic what kind of restructuring of accounts are you anticipating?

Owing to Covid-19 pandemic, stress was expected in almost all the sectors. Restructuring expected is up to 2% of total standard advances, of which corporate will be up to 1.5%. The retail segment has not approached much for restructuring, MSME has the same pace as in the previous tranches. Corporate restructuring requests are in line with expectations. The overall collection efficiency in November 2020 was at 86%.

Did disbursement improve in the third quarter ?

There has been discernible improvement in disbursements under retail assets in the first two months of Q3. In corporate and mid-corporate sector, up to November 2020, the bank had accorded approval for good number of proposals and while half of them have been disbursed, there is still a significant undisbursed amount. Corporate and agriculture credit has picked up in Q3. Also, the bank will look at diversifying growth across sectors and geographies by targeting manufacturing, services and infrastructure companies with good rating, along with refinancing well rated corporates where cash flows are strong.

What will be Indian Bank’s approach towards corporate lending?

Our endeavour is to maintain a good mix of RAM (retail, agri and MSME) and corporate portfolios. The bank is well positioned to grow in both the segments. Our RAM portfolio, at present, is 56% of the total credit. The share of retail assets is 32% of the RAM portfolio and 18% of the total credit portfolio. The bank proposes to concentrate on industries with low and moderate risk due to Covid impact. We are targeting a moderate growth of 10% in corporate credit. So far, the growth in corporate sector has been mostly for NBFC/govt/PSE segments. We expect private investments to pick up in Q4.

How much recovery do you expect by the end of this fiscal?

Under NPA management, focus is on arresting fresh slippages and recovery in the existing accounts. Credit monitoring – a vertical with centres in Chennai and Kolkata, monitors and reviews on a daily basis all accounts showing incipient signs of any irregularity. Accounts in the watch list are closely monitored. SARFAESI action is being initiated in all eligible NPA accounts to speed up the recovery. Recently we have conducted mega e-auctions in which total 166 properties were sold. Online OTS (one-time settlement) portal has been implemented for small accounts up to outstanding of Rs 1 crore and field functionaries are advised to mobilise maximum OTS proposals.

How is your CASA position? Any plans to enhance it?

CASA being the core strength, the bank has been striving hard to increase the CASA ratio on a continuous basis. These efforts are getting translated every quarter as it has improved from 41.28% in March 2020 to 41.90% in September 2020. The bank will be leveraging data analytics and market research to constantly upgrade its product offerings for customer retention. It is also increasing its wallet share by aggressively cross selling other products such as retail loans, credit card, insurance products, mutual fund products and trading account services.

How well has the bank proceeded on integration of Allahabad Bank with Indian Bank?

Treasury operations have been fully integrated. Harmonised products, interest rates and service charges have been made available to customers of the amalgamated entity. A common gateway software (Co-Ex) is being used to provide interface to the two CBS systems to carry out basic financial and non-financial transactions from either bank branch. We expect to complete the CBS integration in this financial year as planned.

What is the update on finding a minority partner for Ind Bank Housing?

Our subsidiary IBHL is in process of engaging consultant to assist the company in its revival plan. The company is also engaged in informal discussion with potential investors. At present, we have not received any formal expression.