Q&A: T Y Prabhu, CMD, Oriental Bank of Commerce

Public sector lender Oriental Bank of Commerce is expecting credit growth to pick up in the next two quarters. In an interview, Chairman and Managing Director T Y Prabhu tells Vrishti Beniwal one worry, across the sector, is the lag in growth of deposits. Edited excerpts:

How do you look at your performance at the end of the first half of the financial year? What is your outlook for the next two quarters?
I think the second half will be better. If you look at business growth in the second quarter, it has slightly slowed for the bank, while it had reached about 20 per cent growth in the first quarter.

Going forward, I see robust growth coming back because the economy is growing and credit demand is picking up. We are targeting 30-35 per cent growth in fee income from core operations. The worry is only the deposits. Deposits in the banking industry are not growing. It grew 14-15 per cent in the first half. Maybe with the kind of rates that have emerged now, I expect depositors to come back to the bank from other types of savings, if at all they are doing that.

From which sectors is the demand coming?
The demand for credit from the agriculture sector, exports, SMEs, retail and also infrastructure is growing. I did huge sanctions in infrastructure last year and most of the projects have come for financial closure and are at different stages of disbursement. In the first half, my infrastructure loans have grown by 30-35 per cent.

Only in the corporate sector has credit growth been subdued across all banks. The reason could be that they are going for alternative financing, like external commercial borrowings.

Your NPAs (non-performing assets) have increased. Is that a cause of concern?
NPAs have gone up in line with the industry trend. It is not unique to us. But we have the capability of providing for it. Our restructured assets have also become NPAs. My coverage ratio is more than 80 per cent. So, it is under control.

How is the liquidity situation in your bank?
It is okay, not very tight. The RBI (central bank) wants liquidity supply in the market to be negative to meet inflation concerns. Liquidity has recently been affected because of the Coal India issue, but it will come back to the system now.

How much of your lending is linked to the base rate now?
Around five to 10 per cent. Borrowers are shifting to it now. Those linked to PLR (prime lending rate) will switch when they come for renewal.

When are you expecting capital infusion from the government?
It should happen by December. The government is working on modalities.

What kind of impact will RBI’s policy measures have on lending and deposit rates?
Short-term rates have already gone up and that is the objective of the central bank when it raises policy rates. Deposit rates have also gone up. In the long run, there may be some upward bias for deposit rates. Going forward, deposit rates may go up by 25 basis points.