Dena Bank Chairperson and Managing Director Nupur Mitra, who is due to retire on December 31 this year, feels that customers at the bottom of the pyramid offer lot of opportunities for banks to expand business.
Mitra, who assumed charge as the chief of the public sector bank on November 1 last year, is the first woman chief of Dena Bank, which has a large branch network in Gujarat and Maharashtra.
Mitra, who started her banking career as a direct recruit officer with Bank of India in 1975, spoke to Business Line on how she has changed Dena Bank’s lending strategy, business diversification and unfinished agenda:
Excerpts:
Is the worst over for banks in terms of restructuring? What is Dena Bank’s position in this regard?
After the first quarter, most investors had written us off. We are now treading cautiously on lending. Where expansion proposals are not viable, we are clearly telling our existing customers that we cannot support them.
Our total restructured portfolio as on September 30, 2012, stood at Rs 4,500 crore, much of which was on account of State electricity boards (SEBs). Total exposure to SEBs, at present, stands at Rs 2,500 crore. Among the SEBs in our portfolio which have been restructured are Rajasthan, Uttar Pradesh, Haryana and Punjab. Among the non-restructured SEBs in our portfolio, Gujarat, Andhra Pradesh and West Bengal SEBs are all profit-making.
The fresh restructuring pipeline stands at Rs 162 crore, of which, Rs 74 crore is on account of Suzlon Energy.
Which sectors do you have major loan exposure to?
We had about 25 per cent exposure to the power sector. But due to concentration risks, we reduced it to 15 per cent of total loans within a year. In another 2-3 months, we will bring it down to 12 or 13 per cent. Hence, we will not take further exposure to the power sector.
We are going slow on exposure to the steel and textile sectors as signs of stress still exist. In the housing finance sector, our exposure is about 11 per cent. In the agriculture sector, we have an exposure of about 13 per cent and will reach the RBI’s target of 18 per cent soon.
How are your tackling NPAs in the SME segment?
Most banks have been lending to SMEs at a higher rate of interest, but they are not sustainable at 16 per cent or above. Hence, we have reduced our interest rates across the board to 11-14 per cent. On an average, we are lending at 12 per cent.
It has been a year since you took charge of the bank. What are the changes that you have made that has helped the bank?
We are not lending below the minimum investment grade of ‘BBB’. This has helped improve our asset quality and profitability. We also have gone in for migration in our rating system in a tie-up with Crisil. This has restricted our gross NPA ratio to around one per cent while other banks’ figures are at four and five per cent.
What is happening on the retail lending front?
In retail, we are growing at around 15 per cent. In the home loan segment, we are encouraging first-time buyers, as house is an emotional matter for them. Also, we have tie-ups with builders to minimise frauds.
There are many unscrupulous buyers, especially in Andhra Pradesh, where so many housing loans have been given by multiple banks. So when the Central Registry becomes active, this issue will be resolved.
At present, most of the banks are chasing retail borrowers. Do you plan to get aggressive on the retail front?
I do not follow what the other banks are doing. We should only go for the business where we have confidence and the conviction. In the retail segment, you cannot and should not go into overdrive. Also, in the gold loan segment, Gujarat and Maharashtra are not major players.
How are you performing in terms of current and savings accounts (CASA)?
We opened about 14.5 lakh accounts in 6-8 months under the financial inclusion programme, and our average balance in the no-frills accounts is Rs 10,000. So, there is money at the bottom of the pyramid and they offer good business opportunity.
Public sector banks must concentrate here, as there is no competition. And here (smaller cities and villages), there is a generation waiting to be tapped. In the high net worth segment we cannot give the service that a private bank can.
In FY13, we are looking at around 16 per cent growth in credit and 18 per cent in CASA.
Your business is concentrated in Gujarat and Maharashtra. Are you looking at diversifying to other regions?
Yes. Our new branches are coming up in other States. To meet our target of 100 branches this year, we will be opening 25 more branches, which will be outside Gujarat and Maharshtra. Currently, we have 1,417 branches, of which, 546 are based in Gujarat and 262 in Maharashtra.
On the ATM front, we have 561 at present and want to double the count in the next two years. In fact, our biometric ATMs are getting 50-60 hits per day in the tribal areas. This shows that rural India is not averse to technology. In many of our branches, crop loans have crossed Rs 1 crore.
What about hiring?
There are 100 satellite branches that work only once or twice a week due to staff shortage. This increases our operational costs. Hence, we have recruited around 1,000 people so that these branches run for more number of days to reduce these costs. Also, our drawback is that we are a smaller bank, so, not many people want to join us. But with the new recruitment procedure (State-wise), our vacancies should get filled. Further, there are thousands of blue-collared jobs being generated in Gujarat. This will create more business for banks.
Do you intend to venture into insurance as has been done by your peer banks?
For now, we want to concentrate on our core banking business. Though our peers have ventured into insurance, how many have been profitable? We should not enter into any business that doesn’t fetch returns. Unless I am very sure that a business will give me returns within five years, I will not venture into it.
However, I would have liked to enter into the non-life insurance segment if my tenure was longer as the break-even period is shorter. As of now, we are a corporate agent for United Insurance.
Any overseas expansion plans?
I would love to see Dena Bank have more international presence as we have good brand equity among the Gujarati community, which has a strong overseas presence. We can get them to invest in India. We have applied for permission to open an office in London, and branches in Kenya, Hong Kong and South Africa.
Any unfinished agenda you would have liked to see completed if your tenure was longer?
We have started a scheme whereby farmers are given medical insurance along with every Kisan Credit Card. I would have liked to see this scheme mature. Sometimes crop loans go bad due to the health of the farmers, who are also the head of the family.
Farmers in our country are not well provided medically. So they can get some respite in the form of immediate reimbursement from medical insurance instead of loan waivers or concessions. This will build a repayment culture among farmers and reduce the number of NPAs in the agriculture sector.