With no PCA overhang, IDBI Bank expects to grow loans at 8%-10% in FY22

Corporate credit back on the lender's agenda; RBI to review the lender's performance each quarter for 1 year

Freed from the prompt corrective action (PCA) regime, private lender IDBI Bank is looking to grow its corporate credit book, especially in mid-sized units, in a calibrated manner. It expects to clock an overall credit growth of 8-10 per cent in the next financial year (FY22).
 
Rakesh Sharma, its managing director and chief executive, told Business Standard that the days of shrinking corporate loan book due to restrictions are over. He said the bank has high-rated corporate clients and will be selective and cautious when it comes to lending to firms and giving advances to industries. The bank, he said, does not want to repeat mistakes of the past. He said that the retail and small and medium-sized enterprises’ share in the total loan book will continue to grow. There were severe curbs on the bank in taking its additional exposure to corporates under the PCA framework. Its corporate advances shrunk 18 per cent, from Rs 77,692 crore in December 2019 to Rs 63,971 crore in December 2020, according to the bank’s presentation.

 
The YoY loan growth is expected to be 5 per cent for the current financial year. Sharma expects retail loans to grow 10-12 per cent in FY22, up from the likely 4-5-per cent growth this year. Sharma said the bank will stay within the threshold of the PCA. The RBI will review its performance each quarter for a one-year period. The lender was placed under PCA in May 2017 on deteriorating credit and financial profile. The bank also has to bring down the cost-to-income ratio (C/I ratio) through prudent expenditure management. The C/I ratio was 54 per cent for the nine months ended December 2020. The bank will bring it down below 50 per cent by March 2022. Lending to the corporate segment will help to increase income and reduce the C/I ratio, he added.
 
Asked about bringing in a strategic investor through divestment, he said, “The government will decide on it. My task is take care of the performance.”
 
The government holds 45.48 per cent stake in the lender. LIC held 49.24 per cent stake as of December 2020.