We are not raising interest rates for now: R K Dubey

Interview with CMD, Canara Bank

Public sector banks (PSBs) have seen a steep rise in non-performing assets and this seems set to continue. Stock markets are punishing them and liquidity tightening to stem the slide in the rupee is also affecting performance. Canara Bank’s chairman and managing director, R K Dubey, talks to Clifford Alvares & Dev Chatterjee on the situation. Edited excerpts:

Non-performing assets have been a concern for most PSU Banks. What are you doing about it?

Non-performing assets are low in the small retail segment. What happens is that a big loan turns bad and that affects the entire loan book. But we have been focusing on recoveries very aggressively.

Due to our stance on recoveries, we have managed to keep our non-performing assets under control. We will continue to focus on recoveries. We have bought down our net-non performing assets in the current quarter to 2.34%.

Will you raise rates in the current environment?

We are not going to raise interest rate - at least in the next coming days. The environment is tough but we will watch and not raise interest rates suddenly and continue to keep the rates low for our customers.

How much loan growth are you targeting for the next?

We are looking at a 20% loan growth in the coming year. Our agricultural loan book is growing more than 30%. Growth in the rural areas has been very good and we confident of good growth coming from these areas. Overall, our loan book should grow by around 20% in the next year.

Cost of funds for the banking industry is expected to rise? How do you see it shaping up for you?

We have been replacing our high cost deposits with low cost ones. We have been to improve our CASA deposits for some time now.  We are running deposit garnering schemes whenever we can. We have bought down our bulk deposit segment significantly from 46% to 13%.

Our CASA deposits have gone up this quarter to 24.5%, and through this our focus will be on keeping cost of borrowing low.  Our fee income has gone up considerably in the last quarter.

What margins do you expect in the future?

Our NIM was 2.2% last quarter. In the future, we hope to maintain it around 2.2-2.4 levels. Our focus on CASA and reducing costs should keep our margins steady.

The banking industry is seeing headwinds of the rupee depreciation and slowing economy. How do you see the industry coping up?

The rupee depreciation is a cause of worry, and stabilising the rupee is first priority. The RBI and the government are doing what is required to stabilise the rupee. If the situation improves on the exchange rate front, a lot of our problems will be solved.

But we are keeping our fingers crossed. Its going to be tough, but the necessary steps are being taken.

Deccan Chronicle has been a NPA for the bank and Canara had done a forensic audit of the company? What's the update on this company?

The CBI has already been investigating the case and it has been declared a fraud. We have provided for this loan but this does not mean that our entire loan has gone bad. Our recovery process is on and we expect to recover our loan after selling assets in due course as per laws of the land.