BL Interview. Bank of Maharashtra’s advances to grow 1.5 times the banking industry average in FY24: Chief Rajeev

The QIP has twin objectives -- to reduce Government holding in our Bank in keeping with SEBI norms on Minimum Public Shareholding and mop up growth capital.

We are coming out with a ₹1,000 crore QIP issue, comprising a base issue size of ₹500 crore and a green shoe option of ₹500 crore, most probably in the first week of June.

Capital adequacy-wise, we don’t have any issues. It is more than 18 per cent. After the QIP, the Government’s stake in our Bank will come down by 3-4 per cent from about 91 per cent now and the capital adequacy ratio will go up to about 19-20 per cent.

With our average loan growth rate being about 25 per cent, capital requirement will be there to support this growth.

As at March-end 2023, out of 13 key parameters, our bank was leading in seven (including total business growth and CASA deposits, and lowest cost-to-income and net non-performing assets ratios) in the banking sector.

Our board is of the opinion that we can grow our credit at about 1.5 times the expected industry average of 14-15 per cent (which is double the projected GDP growth) for FY24. Last year, our credit growth rate was about 29 per cent, which was almost double the industry growth rate. This has been the case for the past 2-3 years.

Since we expect credit growth of 21-22.5 per cent, deposits have to grow by 14-15 per cent. CASA (current account, savings account) deposits will be maintained at about 53-54 per cent of total deposits.

One of the areas we will be looking to expand our presence in is the loan against receivables of (road) toll and rent securitisation. So, we are taking a cash-flow-based approach to financing. The assets we already helped create via term loans will be supported further by securitising the receivables. Loan against receivables will also be available to new customers.

We expect to grow this portfolio by at least ₹8,000-10,000 crore this year. In the last three-four months, we have built an LRD (lease rental discounting) portfolio of ₹3,000-4,000 crore, comprising rent receivables from MNCs. Last year, this portfolio was only ₹500-600 crore. There is no NPA in this portfolio.

Our loan mix between RAM:Corporate is 57:43. We will continue around this level, with a one-two per cent swing here and there.

We are supporting the creation of health infrastructure across the country. There is good scope for growing loans in this segment.

RAM (Retail, Agriculture, and MSME) sector will grow by about 20 per cent without any difficulty. Our focus is mainly on secured loans. Last year, gold loans grew by about 40 per cent to about ₹5,000 crore. This rate of growth will continue in FY24 also. This portfolio is expected to grow to ₹8,000-9,000 crore by the end of FY24.

Due to Government’s thrust on capital expenditure, we see good scope for lending to roads, airports, urban development, renewable energy, electric vehicles, among others.

Last year, we had an excess SLR (statutory liquidity ratio) of about 8-9 per cent. At the beginning of FY23, our C/D ratio was around 67 per cent, which increased to about 75 per cent by FY23-end. We sold off five to six per cent excess SLR (government securities and state development loans) and shifted the proceeds to advances to earn more interest income. This way around ₹20,000 crore was shifted to advances. Now, the excess SLR is only ₹5,000-6,000 crore. So, there is limited scope to shift SLR. Out of ₹50,000 crore deposits that we expect to mobilise, we will keep at least 20 per cent in SLR. So, ₹40,000 crore will be available to support credit growth. Our C/D ratio may reach close to 80 per cent in FY24.

At 0.25 per cent of net advances, our net NPA ratio is the lowest in the banking industry. We intend to keep net NPA in the 0-0.5 per cent range. Our board has fixed the upper tolerance level at 0.50 per cent.

We will bring down gross NPA below 2 per cent by March-end 2024 (from 2.47 per cent as of March-end 2023) as recovery is good.

Slippages have come down to bare minimum. Now, at least 1 per cent of the assets will slip over a period of time. For example, our slippages in the last three years were ₹500-550 crore on a quarterly basis. But out of this, a minimum of 50-60 per cent of these assets get upgraded in the next quarter. This trend will continue. On average, the slippages will be 0.75-0.80 per cent. But the real bad debts will be around 0.25 per cent to 0.30 per cent. So, credit cost will be a bare minimum. It will be about 0.50 per cent yearly.

Bringing it down further may be difficult. Globally also, this ratio is in the 35-40 per cent range. In India, Banks’ C-I ratio is slightly higher because the banking we do, which includes social banking, is different. Our Bank’s C-I is the lowest in the banking sector because of the efficiency of our operations. This ratio will be range bound in the 40-42 per cent level. In the last three years, we have opened about 450 branches. So, naturally, the operating costs have increased. But, we have managed to neutralise this by reducing the area of our branches and other cost reduction measures.

With the help of space audit, we have been able to release/reduce 6-7 lakh square feet of space across the country over the last three years. Simultaneously, we could open 450 branches. So, there is no additional increase in area. While cost has not increased, our income has doubled.

For example, wherever possible, we have installed solar panel systems for electricity. Earlier, the expenditure towards the monthly electricity bill at the head office was ₹3-3.5 lakh. Now, 50-60 per cent of the electricity requirement of the head office is met through solar.

So, head of expenditure has been audited for cost reduction.

In the last three-four years, we have recruited about 5,000 people as part of our expansion plans. This year, we will be adding 300 branches and recruiting about 1,200 people (including Managers and Senior Managers from other banks, specialists -- Chartered Accountants, lawyers, IT experts, and freshers). Now, we have 2,203 branches. Our network will expand to 2,500 branches by March-end 2024.

Last year, 300-400 people from large public sector banks joined us due to good perquisites, promotion avenues, and rewards and recognition.