Our bank is no longer community-based: K B Nagendra Murthy

Interview with MD & CEO, Tamilnad Mercantile Bank

Tamilnad Mercantile Bank (TMB) is one of the oldest and most profitable of private banks in India. Set up the Nadar community in 1920 to finance the trader community's needs, it has predominantly been community-based. K B Nagendra Murthy, the managing director and chief executive officer, talks to T E Narasimhan on future plans. Edited excerpts:

How has this financial year been?
We are comfortable in achieving the bottom line and net profit targets. The net profit will be around Rs 400 crore, as compared to Rs 313 crore last year. However, the top line was under pressure. We might not achieve our target of Rs 40,000 crore but will end with Rs 35,000-36,000 crore.

What are the reasons?

Mainly pressure on deposits, which did not see much growth. It (deposits not growing) was an industry-wide phenomenon. While the sector is expected to report 11-12 per cent growth in deposits, TMB will be closing with around 16 per cent.

Pressure was also there in Casa (current and savings accounts), which did not grow in 2012-13.

What are you doing to boost deposits and Casa?
In the past 10-15 days, we have been aggressively working on some measures, which gave some positive outcome. For instance, for 400-days deposit, the banks offers 10 per cent interest per annum.

To improve Casa, the bank offers five per cent interest for Rs 1 lakh and above. With these and other measures taken, we will see good growth in the next financial year.

What are your targets for FY14?
Around 28 per cent growth in overall business and 30 per cent in net profit.

Any fund-raising to support the growth?
Till 2019, the bank is comfortable and can manage with internal resources.

Then, what is the purpose of the public offer (IPO) you have planned? What is its current status?
We are waiting for the AGM (annual general meeting) to happen. The matter is sub judice; it will take six months after the Madras high court gives its nod. The purpose of IPO is not to raise money. It is to meet RBI's (the central bank's) direction, and for better disclosure, corporate governance and compliance.

The bank was stuck in an ownership battle for a long time, which resulted in delaying major decisions, including the IPO. What is the current status?
Sub judice; I won't be able to comment on it.

TMB was always seen as a conservative and a community-based bank. Is it good to be so, in the long run?
Anybody who is into the financial market needs to be conservative. Despite the hard times, the bank is able to post good profits. It is because of the conservativeness, which leads to better asset quality management.

TMB was founded by a particular community and it was run by them; they proved to be the best brains in trading and in enterprise skills. But in the last few years, the bank has been run by professionals, appointed as MD & CEO, and part of the community.

Today, 15 per cent of new branches are being opened outside Tamil Nadu, in places like Gujarat, Maharashtra, Andhra Pradesh and others. The bank's top five customers are from outside Tamil Nadu. This shows the bank is not community-based.