Bank of Maharashtra to reduce exposure to corporate loans

Corporate loans are less profitable as corporates bargain to negotiate interest rates to their advantage

Bank of Maharashtra is planning to scale down the share of corporate loans to 60 per cent of the total credit portfolio during the current financial year from the 70 per cent level.

The bank wants to lower its exposure because these loans are less profitable as the corporate sector has a bargaining capacity to negotiate the interest rates to its advantage, according to bank executive director R Athmaram.

He said the bank aimed to ultimately bring down the share of corporate loans to 55 per cent of the total loan exposure while increasing SME and retail advances in that proportion.

The bank has set a moderate target of 12-15 per cent for asset growth in the current financial year though Athmaram said they still had some distance to cover to achieve the target. “We will be doing some good proposals in this two months and they may help us in achieving the target,” he said on Monday.

He, however, said the management was confident of achieving 18 per cent asset growth for the next financial year. They would be needing an additional Rs 500-700 crore capital next year if the credit growth is on expected lines.

Last month, the bank had raised Rs 1,000 crore in Tier 1 capital by way of issuing bonds and it would consider a follow on public offer (FPO) to raise funds next year.

It expects the electronic mode of transactions to reach 70 per cent of the total transactions on the back of mobile banking. The bank has launched a mobile banking application providing access to most of the services to its customers through this app.

The bank has reported a net profit of Rs 117.82 crore in the second quarter ending September, 2014 more than 50 per cent down from Rs 266.33 crore in the corresponding quarter previous year. The bank was yet to announce the third quarter results.