With a business target of Rs 3,00,000 crore for 2013-14, Indian Bank has decided to focus more on retail business during the year.
The bank will also focus on loan recovery to bring down gross non-performing assets to below 3 per cent, and net NPA to less than 2 per cent, according to T.M. Bhasin, Chairman and Managing Director. In an exclusive interview to Business Line , Bhasin spoke about the bank’s performance last year and its target for the current financial year. Excerpts:
The bank has posted over 15 per cent drop in net profit in the fourth quarter of 2012-13 compared with the corresponding previous year quarter. What do you attribute the drop to?
The year 2012-13 was very challenging for the entire banking industry. In our case, though we grew over 17 per cent in total business and net interest income too improved, the profitability suffered because of additional provisioning we made and increased NPA, on account of new slippages during the last quarter. We made a provision of Rs 704 crore for pension against Rs 400 crore last year, and an increased provision for gratuity at Rs 146 crore from Rs 80 crore last year, as more employees are retiring. Besides, we provided Rs 38 crore for wage revision, as we expected at least 10 per cent increase in wages.
Besides, two-three large accounts slipped into NPA during the last quarter — one is a ‘granite mining’ account from Tamil Nadu for about Rs 160 crore and a fabrication unit in Gujarat for about Rs 140 crore. Also, some accounts from sectors such as education, agriculture and MSME.
How about your restructured account portfolio?
Our total restructured book is of around Rs 12,000 crore. Out of this, NPAs are for about Rs 1,000 crore. This is one area we regularly monitor to ensure that these accounts do not slip into NPA.
What is your capital adequacy ratio? Are you planning to raise more capital during the current financial year?
Our Basel II capital adequacy ratio as on March 31, 2013 is 13.08 per cent. Out of this, tier-I alone is 10.88 per cent and tier -II is 2.20. So, though we already have secured permission to dilute another 10 per cent, we do not see any need for raising fresh capital from the market as on date. Also, we have our rating done by agencies such as ICRA and CARE for raising tier-II bond for Rs 1,000 crore. Should there be any need in the second or third quarter, we may go for it.
Besides, we have maintained the net interest margin at 3.09 per cent and the return on average assets at 1.02 per cent, which are the best in the industry. This would enable us to plough back our profits. This year too, we have added Rs 1,100 crore to the reserves, raising the capital adequacy ratio.
What is your business target for the current financial year, and how are you going to tackle NPA?
Internally, we have fixed 20-21 per cent growth target for the year 2013-14. We have already reached Rs 2,50,000-crore business. We are confident of crossing Rs 3-lakh crore mark during the year. We will be able to achieve this by focusing more on retail business.
On account of NPAs, we will continue our aggressive recovery drive at every level — from regional, zonal level to the headquarters. The asset quality will certainly improve. Our target is to bring down our gross NPA to below 3 per cent and our net NPA to less than 2 per cent.
Your bank is one of the PSU banks that figured in the Cobrapost allegations…
I have personally seen that video. There were some hollow advices given to the journalists by the branch manager concerned. But, that did not fructify into any business for us. So, practically, there was no violation of KYC norms if we see from the banking industry point of view. However, going by the tone and tenor of his speech in the edited version of the video file, it appears that he was trying to prompt him with some suggestions, which is, of course, unbecoming. So we discussed internally, and placed the manager concerned under suspension.
What are the corrective measures you have taken?
The suspension order should have conveyed the message to all. Besides, immediately on the same day, we issued a circular to all our branches as to how employees should conduct themselves. We have also instructed that all our operational accounts should be KYC (know your customer) compliant by June 30, 2013. As of now almost 99 per cent of accounts are KYC-compliant.