Commenting on the numbers, MS Sundara Rajan, CMD, Indian Bank, said FY09 net interest margin has come in at 3.54% as against 3.45% year-on-year. “Gross non-performing assets stand at Rs 459 crore versus Rs 486 crore, where as net non-performing assets have come in at Rs 93 crore as against Rs 98 crore.”
According to him, credit growth for FY09 stands at 28%. He sees credit growth for FY10 at 20%.
Here is a verbatim transcript of the exclusive interview with MS Sundara Rajan on CNBC-TV18. Also see the accompanying video.
Q: Your net profit growth is around 30%. Can you take us through what was the margin picture, how much did you do in terms of net interest margins (NIM)? What was advances growth?
A: The bank has a clear-cut strategy at the commencement of the year itself. We planned that we will grow around 20% on the advances portfolio and around 17% on the deposit portfolio.
When we started with this attempt, what we did was in the first two quarters itself we wanted to ensure that there should be maximum credit growth so that the bank will be able to enjoy the fruits of it. That is how we have started doing it. At the same time, the cost of the deposit was also contained. The bank was having high cost of deposits at around Rs 8,700 crore as of March 2008. In the first quarter, we started shedding around Rs 1,700 crore or so. Over a period of time, we were able to shed around Rs 5,000 crore of this high cost deposits. From Rs 8,700 crore, it has come down to Rs 3,700 crore or so. So, we did it that way.
Q: How are your margins panning out therefore? What did you do in terms of NIM compared to a year-ago or compared to a quarter-ago?
A: The NIM compared to last year, i.e. in March 2008, was 3.45%. As of March 2009, it has improved to 3.54%. We were able to improve it by nine basis points from 3.45% to 3.54%.
Q: Can you also take us through your NPA picture? What is it in terms of aggregate numbers, the net and gross? How much of assets did you restructure?
A: When it comes to NPAs, the gross NPAs of the bank as of March 2008 were around Rs 486.87 crore. It has come down to Rs 459.18 crore. Percentage-wise, from 1.21% it has come down to 0.89% at the gross level.
At the net level, we were about Rs 98 crore as of March 2008. It has come to Rs 93.81 crore as of March 2009. Percentage-wise, it has come down from 0.24% to 0.18%.
Coming to restructuring, the bank has restructured the proposal to the tune of around Rs 2,159.17 crore. I would request you to appreciate one thing. The word restructuring will immediately send a pressing button in the minds of all investors. What is restructuring? I would say restructuring is strictly the thing where the asset is not backed up by security and you may have to carve out a certain portion as a working capital term loan. Whereas with regard to Indian Bank, the Rs 2,159.17 crore and others are about Rs 388 crore of SME we have done and around Rs 83 crore is using the CDR mechanism. Totally, it will come to around Rs 2,700 crore. Hardly Rs 200 crore pertains to a category which is incurring cash losses or where funded interest has to be done.
The remaining Rs 2,500 crore is all re-schedulement of installments. Asset backed up security or parties that are promptly servicing the quarterly interest.
Q: But if you didn’t reschedule would they have become NPAs?
A: Some of them would have become NPAs.
Q: What percentage you think?
A: It will be very difficult for me to say. Let me do this exercise and then share it with you.
Q: Could you comment on whether this particular quarter was an extraordinary quarter in terms of the fact that no money was available except for banks like yourselves? What kind of credit growth do you see going into the next one or two quarters? If you could break it up by SMEs, midsized retail, perhaps agriculture, exactly what kind of growth rates do you see?
A: The bank was willing to lend as well. At Indian Bank, we do not deny any credit as well. Last year, we said we will grow around 20%. In credit, we were able to end up with 28%. This year as well, we are planning to grow at the rate of 20%.
Normally, April to September is a slack season where credit tends to have a delayed growth, but we have a clear-cut strategy. We will follow what we have done last year, and ensure 20% growth. We will also ensure a substantial portion grows in the first and second quarter, so that the fruits of it will come and we could do a similar performance. That is how we are strategizing it. It will be widespread, agriculture and SME will be our key areas. Also, we are looking out for credit to commercial companies. We are looking at different avenues. We will work it out and ensure that we will be able to do it.
Q: Will you be able to keep 3.54% for the next six months?
A: It is challenging. We are going to superannuate on March 31, 2010. So, I’ll take it as a challenge.