'Interest rates will continue to remain the same'

Q&A: MS Sundara Rajan

Chennai-based Indian Bank has reported a 52.40 per cent rise in net profit for the quarter ended June 30 to Rs 331.6 crore as compared with Rs 217.6 crore in the first quarter of the previous fiscal. After announcing the results, Bank Chairman and Managing Director MS Sundara Rajan tells Business Standard that one of the main reasons for this growth is fee-based income, which he says will continue to be a focus area for the bank. Edited excerpts:

You have said that one of the key reasons for the bank’s 52.40 per cent growth in net profit is fee-based income. Can you elaborate?
The bank’s fee-based income rose 43.97 per cent to Rs 350.15 crore in the quarter compared with Rs 243.21 crore in the quarter ended June 2008. In the coming quarters, the bank will look at increasing the income by foraying into new areas.

How you are planning to increase the fee-based income?
To start with, we are looking at foraying into the derivatives business in a month to augment our fee-based income. We are currently working with consultants for the venture. A team from the bank is going through training. We will also expand wealth management services to more branches.

Will the foray into derivatives be through a joint venture?
No, it will be on our own.

Earlier, you had said that the bank was looking at starting an asset management company (AMC)? What is happening on that front?
The AMC plan has put on hold for now. We want to focus on strengthen our existing portfolios.

You have said that credit is not increasing. What is the reason for this and how Indian Bank plans to address the issue?
This year, the bank’s credit grew by just around Rs 600 crore. Around the same time last year, it had grown about Rs 4,840 crore. Many industries where sanction limits are there are not drawing on the rebate. We are talking to associations to understand their problems. I am sure that in the days to come, the credit will pick up. I have asked branch heads to work on the same and set a target of a minimum of Rs 50 lakh. Focus should be on trade advances, MSME advances, apart from corporate credit.

What are your expansion plans?
In 2008-09, the bank expanded its touch points by opening 101 new branches and increased its domestic distribution network to 1,642 branches and 755 automated teller machines (ATMs), including 205 offsite ATMs. The bank installed 11 biometric ATMs for the benefit of women self-help groups in Tamil Nadu on an experimental basis. In 2009-10, our target is 100 new branches.

Where are interest rates headed?
The rates will continue to remain the same.