IDBI Bank to draw up 5-year business road map

Noting the missed opportunities in lending to rural and small and medium enterprises, M S Raghavan, new chairman and managing director of IDBI Bank, wants the bank to shed the "arithmetic growth" mindset.

He wants the bank to scale up activity in retail and rural lending and financial inclusion, building on its corporate business, once the mainstay of the erstwhile development finance institution.

In his address to bank employees, Raghavan, who took charge last week, said the bank had to take a leap and work with a "geometric growth" approach.

The bank would soon begin work on a five-year plan. Its board is meeting on Thursday in New Delhi to review results for the June quarter of the current finacial year. The bank has a lot of ground to cover in priority-sector lending, too.

Its agriculture credit portfolio, a key component of priority-sector lending, shrank 21.2 per cent in 2012-13 to Rs 6,493 crore, from Rs 8,237 crore a year earlier, according to finance ministry data.

Raghavan said he was pained to sign a note on IDBI making a huge contribution to the Rural Infrastructure Development Fund, which fetches a return of just 5.3 per cent. Banks have to contribute to the fund to compensate for shortfall in priority-sector lending.

Of its 1,077 branches (as of March), 132 were in rural areas and 282 in semi-urban regions.

SIGHT NOW ON PRIORITY SECTOR

• Shift mindset from ‘arithmetic growth’ to ‘geometric growth’, says new chief
• Rural ramp-up for low cost money and loans
• Grow retail and SME business
• Scale up delivery channels
• Build on customer centric focus

Casa growth
The Mumbai-based public sector lender saw loans and deposits growth moderate in 2012-13, as the economy slowed and demand turned sluggish. Loan growth declined from 15 per cent in 2011-12 to nine per cent in 2012-13. Deposit growth also moderated, to eight per cent, in the past financial year, from 17 per cent in 2011-12.

He said, on the liabilities side, the bank was weak in Casa (current account and savings accounts), a cheap deposit pool. The share of this category in the total deposits has grown to 25.1 per cent in the past three years, from 14.6 per cent in March 2010.

Though an improvement over previous periods, the levels are still low compared to other public sector banks (PSBs).

The share of Casa was 30.3 per cent in the total deposit pool of PSBs at the end of March, according to finance ministry data. The share of retail loans was also low.

The loans under the personal banking group were Rs 32,703 crore of the total advances of Rs 1,96,306 crore at the end of March.