With an ambitious plan of doubling its business from about Rs 62,000 crore at the end of December 2008 to Rs 1,25,000 crore within the next three years, public sector player Dena Bank hopes that its new branches will help it meet the target. Chairman and Managing Director D L Rawal speaks to Niladri Bhattacharya and Abhijit Lele about the bank’s strategy and how it is dealing with the current economic slowdown.
Given the current environment, would it be possible for you to meet your target of doubling business over the next three years?
May be. The effect of the environment could be there, but we intend to open 400 branches in these three years to generate fresh business. We would expand our presence to every corner of the country. So the incremental business will help us achieve the growth target.
Also, we cannot afford to lose our market share in the areas where we are already strong, even as we simultaneously expand into new areas. We are focusing on the need to spread to rural and semi-urban areas and generate new pockets of business opportunities.
We need to expand in order to survive for another 100 years. In today’s market environment, credit should be diversified – not only industry-wise but also geography-wise.
What are your capital raising plans to support your growth?
We will require an equity capital of Rs 1,000 crore for this. Our plan is to raise Rs 500 crore in the next financial year, and then we will need another Rs 500 crore over the subsequent two years. In the current fiscal, we have raised Rs 500 crore in Tier-II capital.
Is your bank focusing on any areas in these tough times?
Basically, there are four things we are concentrating on: First is containing our costs. Second, expanding our client base. Third is reduction in non-performing assets (NPAs). And the fourth is ensuring development of our employees’ skills.
You have a large presence in Gujarat where two sectors – textiles and diamond – have been significantly hit by the global downturn. How are you dealing with the situation?
All sectors are affected. There are certain issues with the diamond sector since order books have shrunk significantly. Two, receivables are getting delayed. Three, there are some mismatches in their cash flows. As a result, we have gone for restructuring of these accounts in a big way.
Their receivables have been extended as per new RBI guidelines. For correcting the mismatches, we are giving short-term liquidity support so that their working capital is not affected. We have also restructured term loans.
In the case of textiles, exporters who were dependent only on the US and European markets have been affected badly. However, a majority of textile players had diversified their businesses to such new markets as West Asia and other parts of Asia last year itself. They have also been concentrating more on the domestic market, so they were able to save themselves.
But, with delinquencies on the rise, how are you dealing with non-performing assets (NPAs)?
We have made the entire recovery process rigorous. We are trying to restructure accounts which turned into NPAs after December. We have set targets for each office and region regarding the daily monitoring process, especially for accounts that are worth Rs 25 lakh and above.
Each officer has been given a set of clients whom he is required to visit before taking any decision. Every week, an officer is mandated to update the status of an account and act accordingly. The idea is to address any threat immediately.
In case of accounts that have been NPAs for long, and where we have securities that we need to enforce, the SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) is being used so that we are able to recover the cost. We are also trying to settle accounts through the one-time settlement scheme.
What is your experience with the special home loan scheme?
There is some pick-up, but it is below expectation. The main reason for this is that affordable housing is not there. For example, last month, we disbursed Rs 50 crore as against the targeted figure of Rs 100 crore. Real estate prices will have to come down, and there is a general expectation regarding this. So, people are adopting a wait-and-watch policy.
Banks are citing the high cost of funds as one of the reasons for not lowering lending rates. How are you dealing with the cost issue?
On the cost side, we are repricing bulk deposits and time deposits. Our target is to reduce the share of bulk deposits to 10 per cent (of total deposits) by the end of this financial year, from 11 per cent as of December.
The other focus is to mobilise more low-cost deposits like CASA (current and savings accounts) deposits, which we would like to grow by another 2 per cent by next year so that its total share reaches 41 per cent.