One of the largest public sector banks in the country, the Indian Overseas Bank has come out with an aggressive plan to control its NPAs and consolidate its bottomline. R Koteeswaran, managing director and CEO, speaks to Jonathan Ananda on the measures and the bank’s current status. Excerpts:
What credit growth is the IOB targeting in the coming fiscal?
It is likely that we may end our deposits growth at 7 per cent and 3 per cent under advances by March 2015, domestically. The sluggish growth is due to poor credit pick-up & shedding of high cost deposits.We have a suitable strategic plan for improving our capital base and profitability that will help improve bottom-line results and make way for credit expansion.We are trying to target 10 per cent growth in deposits & 12 per cent growth in advances FY 15-16, lower than the expected system level growth because we want to concentrate on strengthening our core business instead.
How is IOB attempting to reduce NPAs?
We have formulated a special recovery effort with a self-imposed target for cash recovery and upgradation. In Q4, cash recovery was Rs 750 crore with total cash recovery of Rs 1,746 crore while total upgradations were Rs 1,007 crore till Feb 2015. A total of Rs 1,037 crore have been sold to ARCs, with another Rs 500 crore set to be sold in March. Since the economy is in revival mode, mounting NPAs and CDR accounts are expected to settle down and we are aiming at bringing down the gross NPA ratio to 6% for FY 15-16.
Is IOB looking to launch new products?
An exclusive recurring deposit product for women customers has been introduced, with an add-on facility of Health and Life Insurance cover through corporate tie-ups. We are also in the process of implementing a new recurring deposit scheme for all Pradhan Mantri Jan Dhan Yojana Account holders, wherein people can deposit money on a daily basis for a minimum period of 24 months. We are also exploring the possibilities of including the group insurance scheme for all these account holders.
Is the bank’s asset-liability ratio at a comfortable level currently?
The asset liability mismatches are monitored by the bank and are within the tolerance prescribed by RBI up to first four buckets and for the remaining buckets within board prescribed tolerance levels. As such, banks don’t foresee any problems in meeting liquidity requirements. Steady decrease of SLR requirements by RBI from 22.50 per cent in July 2014 to 21.50 per cent in February 2015 have left banks with enough surplus SLR.
A 50 bps reduction in interest rates will result in how much revenue loss for IOB?
The impact will be approximately Rs 12.25 crore per month for a 10 bps reduction, which can be managed by reducing the deposits rates only to protect the NIM of the banks. This has been situation since introduction of the Base rate in July 2010, so it is nothing new to the system.
Will IOB raise capital to meet Basel III norms?
The Bank is adequately capitalised. Despite difficult conditions, capital to the tune of of Rs 1,000 crore was raised by issuing additional Tier I bonds at 10 per cent.