Central Bank of India identifies three verticals to beat low credit offtake

Public sector lender Central Bank of India plans to focus on three sectors— retail, agriculture and small and medium enterprises (SME) — to push the credit offtake.

"Liquidity is available in the financial system, but the cost of credit is high. This dissuades the borrowers from seeking bank credit. So, the bank has identified three verticals to expand the lending," M V Tanksale, chairman and managing director of the bank, told Business Standard.

He added SMEs could raise the production for the import substitution if demand from their mother units (export-oriented) was sluggish due to the economic slowdown. Financial inclusion can also help the bank for credit mobilisation.

In order to encourage agriculture lending, the bank has introduced ‘Recovery Chariots’ to educate farmers that defaulting on bank loans might deny them future borrowings from the bank, which is economical compared to borrowing from private moneylenders. So, they should adhere to the repayment of agriculture credit if they want fresh loans from the bank. This may also increase the agriculture offtake, Tanksale said.

The bank aims to bring down the bulk deposit ratio from 31 per cent to 25 per cent to conform to its target of lending to small players. Further, the lender has set a target to bring down the NPAs (non-performing assets) from 4.83 per cent to one per cent, Tanksale added.

The bank will add 250 new branches across India by March 2013, of which a fourth will be rolled out in rural pockets.

The public sector bank has an ambitious plan of adding 3,600 ultra small branches pan-India in six months.

Bank representatives would visit these branches once in a week and direct services would be provided by the so-called Business Correspondents (BCs).

BCs are representatives authorised by banks to act on their behalf.

The capital adequacy ratio of the bank is 12.40 and it is gearing up for the Basel III accounting norms.

The bank may set foot in Zambia, Dubai, Hong Kong and Mozambaque to expand in the global market, Tanksale added.