As part of its three year medium term strategic business plan, IDBI Bank on Tuesday said it is planning to double its business, rebalance loan portfolio towards micro, small and medium enterprises, agriculture and retail credit, augment low-cost deposits and purge the balance sheet of bad loans.
The public sector lender has unveiled the plan in the backdrop of it posting a huge loss of ₹2,184 crore in the October-December 2016 quarter and the government announcing in the Budget that it will consider the option of reducing its stake in the bank to below 50 per cent.
Under the plan, IDBI Bank expects to double its business (deposits plus advances) to ₹10-lakh crore (deposits of ₹5.50 lakh crore and advances of ₹4.50 lakh crore) by FY19 from the estimated ₹5 lakh crore (deposits: ₹2.85 lakh crore and advances: ₹2.35 lakh crore) in FY16.
IDBI Bank will rebalance its portfolio so that the share of loans to retail, micro, small and medium enterprises and agriculture segments increases to 41 per cent of total loans in three years from 33 per cent now.
Consequently, the share of corporate and infrastructure loans in the total loans will come down to 37 per cent (43 per cent now) and 2 per cent (24 per cent), respectively.
Kishor Kharat, MD and CEO, said his bank has overcome the limitations on balance sheet growth arising from it not being able to meet the priority sector lending targets and is now at an inflection point.
Observing that the bank has grown at 5-6 per cent over the last few years due to the limitations, he said it will catch up with the banking industry’s average business growth of 12-15 per cent.
To bring down the cost of deposits, the bank plans to augment low-cost current account and savings account deposits from 25 per cent to 35 per cent of total deposits and reduce dependence on bulk deposits from 44.6 per cent to 32.6 per cent during the three-year period. This will bring down the cost of deposits to 5.9 per cent from 7.4 per cent as at December-end 2015.
The bank will contain the gross non-performing assets to below 3 per cent from 8.94 per cent as at December-end 2015 by stepping up efforts for recovery/resolution of bad loans. It will bring down the net NPAs to near zero from 4.60 per cent through intensive recovery and upgradation of accounts.
Branch expansion To support business expansion, IDBI Bank will add 2,000 branches over the next three years, including 500 branches and 1,500 low cost banking points, and add 6,000 employees to its present count of 15,500.
When asked about his opinion on consolidation among public sector banks, Kharat said the strengthening of his bank’s balance sheet could help it takeover a bank.