If we do not grow we will degenerate: Shiva Kumar

Q&A with the Managing Director of State Bank of Bikaner & Jaipur

State Bank of Bikaner & Jaipur (SBBJ) halted its branch expansion a few years back as it expected to merge its operations with parent State Bank of India (SBI). The bank is setting up new branches again and aims to grow its businesses outside Rajasthan.

SBBJ's managing director Shiva Kumar says while the merger with SBI is still on cards, the bank needs to have more branches to ensure profitable growth. In an interview with Somasroy Chakraborty, he shares the bank's future plans. Edited excerpts:

After a gap of few years the bank has started expanding its branch network. What caused the delay? Will you continue to open more branches in coming quarters?

The talk of merger had brought our branch expansion to a grinding halt. But we have realised that if we do not grow we will degenerate. Hence, we decided to revise our strategy. We opened 50 branches in the past six months. Currently, we have 1,000 branches. We plan to add another 70 branches in the next six months. Almost 50 per cent of these new branches will be outside Rajasthan.

Does it mean that SBBJ's merger with SBI is uncertain?

The merger is still on cards. It is a natural fit. But we want to run this bank profitably till the merger happens. We have demonstrated it. For three consecutive quarters now the year-on-year growth in our net profit has been in excess of 30 per cent.

What is your credit growth target for this year?

In 2012-13, we expect to grow our advances by 17 per cent. We have introduced several new initiatives to drive our retail loan growth. For instance, we are now offering car loan sanctions in 10 minutes and home loan sanctions in 20 minutes through the online platform.

Are you seeing any stress on your asset quality? How big is your loan restructuring pipeline?

We have managed our asset quality fairly well. We added only Rs 29 crore in (gross) non-performing assets between September, 2011 and September, 2012. Our provision coverage remains healthy at 62 per cent. Our restructured loan portfolio is currently around Rs 3,000 crore. But we do not expect further additions in our restructured pool in the current January-March quarter. We also plan to sell around Rs 200 crore non-performing assets in the current financial year.

Have you started reducing your dependence on bulk deposits?

We have reduced the share of our bulk deposits to 12 per cent of total deposits. This will continue and we expect the share of bulk deposits to go below 10 per cent in coming quarters. We have a reasonably good base of current account savings account (CASA) deposits. The CASA ratio is around 36.5 per cent.

Will the focus on low-cost deposits help you in improving your margin?

We expect our net interest margin to contract a bit from 3.90 per cent (at the end of September, 2012). The reason is while we have cut our Base Rate in October we did not reduce our deposit rates.

When will you reduce your deposit rates? Is there a scope for further cut in your lending rates?

We will wait for the Reserve Bank of India's (RBI) credit policy on January 29. If there is a cut in policy rates, we will first reduce our deposit rates. We will then review our lending rates and take a decision.