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Asset quality woes have peaked: S L Bansal

Interview with CMD, Oriental Bank of Commerce

Manojit Saha  |  Mumbai 

S L Bansal, who took charge as chairman and managing director of on March 1, said his priority would be bringing down non-performing assets and improving the share of low-cost deposits. The bank, which reported a dip in in the March quarter, expects the steps taken to strengthen asset quality will help it improve profitability. Bansal talks about his priorities in an interview with Manojit Saha. Edited excerpts:

The bank reported a 20 per cent dip in during the fourth quarter of 2011-12 due to higher provisioning. How do you see the current financial year in terms of profitability?
We are expected to post 20 per cent year-on-year growth in for the current financial year. This will be because, first, the 125 bps (basis points) cash reserve ratio cut by the Reserve Bank of India will release additional funds of around Rs 2,200 crore, which could be deployed and will result in an income of at least Rs 240 crore, assuming 12 per cent interest is charged. Second, we have seen slippages of Rs 3,900 crore in the previous financial year, so we will beef our recovery efforts — both cash recovery and liquidation. This will add to our bottom line. We also think asset quality woes have peaked and we have to make lesser provisions.

What are the steps the bank is planning to take to improve asset quality?
Improving the asset quality is a priority for us. We have created a separate cell for restructuring loans, and loans of more than Rs 10 crore will be handled from the head office. We have beefed monitoring of stressed assets, and will hardly take over any loans from other banks.

What kind of business growth you see in the current financial year?

As on March 31, business of the bank stood at Rs 2.7 lakh crore. In the current financial year, we plan to grow our assets 18 per cent and liabilities 16 per cent.

Which sectors are expected to contribute to loan growth?
We are de-risking our asset book by focusing on increasing our retail portfolio. We have already reduced the rate for home, auto and education loans, for both existing and new customers. In addition, we are offering additional 25 bps lower rate to the existing customers, who have a good track record in terms of payment and savings account balance. At present, our retail loan book constitutes 11 per cent of the loan book and we want to increase the proportion to 15 per cent in the next two years.

Will there be thrust on retail liabilities also?
We had 1,625 branches as on April 1, 2011, which is not a high number given our asset size. This shows the high dependence of the bank on bulk business. We are planning to beef up our branch presence and will open 225 branches in the current financial year, which will take the number to 2,000. We had opened 147 branches in the previous financial year. The opening of new branches will also help us to increase the share of low cost deposits or the current and savings account deposits (Casa).

What is the share of your Casa in overall deposits and where do you see it going ahead?
The Casa ratio was 24 per cent at the end of March. We are targeting to increase the share by 200 bps, in absolute terms, every year.

What is your guidance on net interest margin?
We expect to have margins of three per cent for the current financial year, compared with 2.69 per cent in 2011-12.

First Published: Fri, June 01 2012. 00:28 IST