About a month after the Reserve Bank of India put IDBI Bank under prompt corrective action (PCA) owing to mounting gross non-performing assets, the bank has decided to rebalance its loan portfolio by reducing exposure to corporate and project finance and turn to retail lending.
The bank is looking to grow its retail loan portfolio by 15 percentage points this fiscal.
In its loan book, the share of retail advances increased to 43 per cent in March 2017 from 33 per cent at the end of March 2016.
“IDBI Bank has launched an aggressive turnaround strategy with focus on building a robust retail portfolio, enhancing the capital base and strengthening customer relationship. While 2016-17 posed challenges, the bank’s major thrust will be on rebalancing the business portfolio in the coming months.
“The bank will tap emerging opportunities to grow its business, with focus on propelling notably the retail and priority sector book,” said GM Yadwadkar, Deputy Managing Director, IDBI Bank.
In a bid to redefine itself from a predominantly project funding player to a retail lender, IDBI Bank sees interest rates and customer service playing key roles.
“Pricing of our products will be a major challenge. We are looking to align our interest rates nearest to the competition. Other factors such as service, product penetration and involvement of our existing staff for building customer base will also be deciding factors,” Yadwadkar said.
The bank has stepped up its efforts to aggressively seek recovery of NPAs and take measures for augmenting the capital base.
“We plan to phase out bulk exposure of ₹12,000-odd crore over the next two years. The first year, the target is ₹6,000 crore. As we increase our focus on the retail segment, we are not completely closing our doors to project finance. We will reduce fresh exposure in BBB-rated projects, but will look to add ‘A and above’ rated projects,” said Yadwadkar.
IDBI Bank received capital infusion of ₹1,900 crore from the government in March this year. The bank management is actively engaged with the government for fresh capital infusion, Yadwadkar said, and added that a memorandum of understanding for the same will be signed in a couple of weeks.
The impact of the measures being taken will be reflected in a turnaround by 2020, said Yadwadkar.