Our top priority is to continue focus on high-quality assets: P R Seshadri

The managing director (MD) and chief executive officer (CEO) of the Kerala-based South Indian Bank, Seshadri talks about his priorities, the bank's growth roadmap and third quarter numbers

Around three months ago, P R Seshadri took charge as the managing director (MD) and chief executive officer (CEO) of the Kerala-based South Indian Bank. In a video interview with Shine Jacob, Seshadri talks about his priorities, the bank’s growth roadmap and third-quarter numbers. Edited excerpts:

You took charge of the bank recently. What are your priorities?

Our top priorities include continuing the focus on high-quality assets, improving our processes in such a fashion that we can make it frictionless and building our digital capabilities and frictionless on-boarding of customers, both on the assets and liability sides. The other priority is to ensure that we remain fully compliant —the control and compliance environment of the company increases — so that we become an even more respected participant in the Indian financial services segment. 

What is the growth outlook for the current and next financial year?

Our loan book grew about 11 per cent and deposits grew by 9 per cent year-on-year (Y-o-Y). We think that, going forward, we will grow in the early teens as we try to rebalance our portfolio. We would like to grow equally on both assets and liabilities. We have 948 branches. We would like to consolidate and get more throughput out of the branches. We are not looking for any physical expansion of our branches.

Your net profit was up by 197 per cent during the third quarter. What were the major drivers of growth during the quarter?

The current quarter was a continuation of what has been happening over the last few years. The bank has been focusing on high-quality customers, has been judiciously growing its loan book by getting good customers, as a consequence of which income streams have risen. Our cost of credit, NPA-related costs have dropped sequentially and a culmination of all of this is the fact that profits have risen.  

Your gross non-performing assets (gross NPAs) reduced by 74 basis points (bps), from 5.48 per cent to 4.74 per cent Y-o-Y. Net NPA dropped by 65 bps from 2.26 per cent to 1.61 per cent. In terms of asset quality, what is your outlook for the year and going forward?

We expect this trend to continue and both gross NPA and net NPA numbers will decline, as long as we keep the high-quality loan origination up, which is our aim. Our view is that this will continuously and sequentially decline. Over a period of time, our aim is to bring the net NPA numbers below the 1 per cent mark. Our idea is to bring it down by 10-15 bps every quarter.

Majority of your slippages are coming from business loans, of which the micro, small and medium enterprise (MSME) segment contributes the majority. Are you facing stress in the MSME sector?

With respect to the MSME sector, we do have elevated NPAs. The current flow rate into NPA is much less than what it used to be in the past. The stressed assets, a vast majority of them, have become NPAs over a period of time. In future, we expect smaller flows into NPAs from the MSME side. On the MSME side, we have a large concentration of assets in Kerala and two natural calamities (floods) have happened in that state. Some of the historic NPAs occurred on issues that happened on account of this calamity. From a portfolio standpoint, going forward, we see stress reducing on the MSME side. This is why we are attempting to grow that part of the balance sheet, not just in Kerala but across the country.

How are you planning to diversify your portfolio, which is more focused on corporate and segments like gold?

We have three engines of growth. One is corporate, which is our largest engine of growth and has surged at over 30 per cent Y-o-Y. Gold has grown at 18 per cent range and personal segments like cars and other personal products have grown at 13 per cent. Other areas like agriculture and MSME have been muted. Going forward, we would like to have a balanced growth mix. We would like the MSME and personal segments to grow a little faster. Within that, we do not have our fair share of things like housing, vehicles and personal loans.