Q&A: Bipin Kabra, Dhanlaxmi Bank

'All mismatches are within the limits prescribed'

Bipin Kabra, chief financial officer, Dhanlaxmi Bank, in an interview with Manojit Saha, talks about the allegations levelled by an employees association: Edited excerpts:

What is your reaction to allegations by the All India Bank Officers Confederation, like the one on growing asset liability mismatches?
Asset-liability mismatch is inherent in the banking business. All banks run on certain mismatch of funds. The Reserve Bank of India (RBI) places certain restrictions on individual buckets and mandates not to have mismatches beyond a certain limit. All our mismatches are within the prescribed limits.

Concerns were also raised on profitability.
Yes. Profit in the first quarter stood at Rs 3 crore, and there were reasons for this. Marked-to-market losses were incurred.

Low capital adequacy ratio (CAR) was also seen as a concern. What was the CAR as on September 30?
I will not comment on the second quarter numbers, since the results are yet to be finalised. But if you see the June quarter numbers, CAR was around 11.5 per cent, with over nine per cent Tier-I capital.

The bank has headroom to raise Tier-II capital. Are you planning to raise funds through this route to boost your capital?
Tier-II bond issuances are relatively faster, and given the market conditions, it makes sense to go for Tier-II capital, rather than Tier-I capital. I cannot comment on the timing of raising the resources. We monitor CAR on a regular basis, and whenever there is a need, we will take the route.

Since December 2008, the bank had embarked on a very aggressive growth path, with loans growing 230 per cent over the next two and half years. The banking regulator had asked the bank to slow this pace. Are you looking to consolidate now?
We are consolidating now, not because we are tired of growing, but due to the current market situation of tight monetary policy, which has led to a slowdown in credit growth in the entire banking industry. As a strategy, we consciously decided not to grow at the same level as previous years. Maybe next year, when the credit environment improves, and interest rate cycle is reversed, we would return to the growth path.

Are you exploring legal options to counter such propaganda against the bank?
We are in dialogue with our legal advisors, and will proceed, based on their advice.

Did RBI have a dialogue with the bank's management today?
RBI had not called us, but we have appraised it of the situation.