Optimistic on growth opportunities, realistic about delivery pressures: Karnataka Bank MD

Mahabaleshwara MS, who assumed charge as Managing Director and Chief Executive Officer of Karnataka Bank on April 15, has been with the bank for more than three decades. An MSc from the University of Agricultural Sciences, Bengaluru, he started his career as a teacher and researcher in the same university, and joined Karnataka Bank as probationary Agricultural Field Officer in 1984. In an interview to BusinessLine , he spoke about his plans for the bank and the way to take them forward.

Excerpts:

You had recently mentioned that the bank is in a sweet-spot now. How are you planning to take it further with your new role as MD &CEO?

Yes. Our bank is in a sweet-spot because of the fact that we are one of the few banks that is adequately capitalised. Further, our improved goodwill, well-controlled NPAs (non-performing assets), remarkable improvement in CASA (current account, savings account), dwindling restructuring portfolio, and increased digital transactions are all future positives for us.

As a result, we are being keenly watched by many of the analysts and investors. I consider that now the stage is all set for a take off in accomplishing our Vision 2020 goals. Nevertheless, I am optimistic of growth opportunities, conscious of expectations, realistic about delivery pressures and hence, have tremendous faith in my team.

The priority areas identified for the current financial year are credit augmentation, NPA and stressed asset management, CASA deposits, digital banking initiatives, and para-banking activities.

How did you achieve 9 per cent credit growth in 2016-17 when the system growth was around 5 per cent?

Because of our strategy we could achieve the ‘above industry average’ growth in credit during 2016-17. We extended credit to top-rated companies, focussed more on mid-corporate and retail sectors during the year which added to credit growth considerably.

We have an ‘economic and statistical research cell’ that provides useful inputs on sunrise and sunset sectors, throws light on perceived risks, growth opportunities as well as the relative risk. Based on these inputs, we focus on credit expansion by keeping intact the asset quality.

What plans do you have to tackle NPAs during the current fiscal?

Compared to the banking industry, NPAs are well within the tolerance limit in the bank. (The gross NPAs of the bank stood at 4.21 per cent during 2016-17.) However, we have our own set of standards, and hence, in resolution of NPAs my focus will be more on further reducing it.

Initially, I aim to manage gross NPAs at around 4 per cent and net NPA at around 2 per cent and gradually improve it further.

Hence, the focus will be on minimising the slippages and tighten the recovery mechanism. With a sense of revival in the economy, especially in view of the boost sought to be given to manufacturing through the ‘Make in India’ initiative, we are hopeful of a turnaround in the manufacturing sector.

So far as the agricultural sector is concerned, good monsoon is predicted and several initiatives like increase in minimum support price and the Pradhan Mantri Fasal Bima Yojana are timely steps in the right direction.

The recent NPA ordinance and resultant war on NPA at the national level will set the tone for resolution of corporate NPAs.

Are the loan waivers by some States adding to the banking industry’s woes?

The scheme of loan waiver is meant for those borrowers who are facing financial crisis on account of unforeseen circumstances such as drought and flood.

Mainly, it is left to the wisdom of the State governments concerned. Banks have already factored in such incidences and thus, the impact of such decisions are minimal and that too for a short period.

However, the decision-makers have to be sensitive enough to ensure that such schemes do not dent the repayment culture of the other borrowers who have the repaying capacity.

How do you see the interest rate scenario in the coming months?

The interest rates in the domestic economy are expected to be benign towards the first half of the financial year and then might harden towards the end of the financial year, contingent on the inflation trajectory.

What will be the impact of GST on the economy?

GST (Goods and Services Tax) is one of the best reforms of the century. From the banker’s point of view what I am foreseeing is an increase in transaction volumes, as everything will be accounted for now. Since cash transactions will come down, I see GST as one of the instruments to move towards a cashless economy.

As we will have solid data about the economy, we will be in a better position to realistically assess our GDP. These are all the indirect benefits which no one can imagine.

Karnataka Bank has adopted the practice of grooming its in-house talent for taking up leadership roles. Don’t you think hiring from outside at the top level will give a new shift to the growth story of the bank?

Karnataka Bank has a pool of sufficient talent in the pipeline to take up leadership as and when the need arises.

Lateral entry to higher positions arises when there is a dearth of talent within the organisation. That is not the case with Karnataka Bank.

Further, growth story is a journey and not a sprint. Hence, I believe that consistency and sustainability are the two key factors that influence the market share and we have strategic plans to ensure the same.