Padmaja Chunduru assumed charge as managing director and CEO of Indian Bank on September 21. Prior to this, she was Deputy Managing Director (Global Markets) at State Bank of India's Corporate Centre in Mumbai. Indian Bank is among the few public sector banks in the country posting profits on a quarterly basis. In her first interview with T E Narasimhan, Chundru dwells on her observations of the current trends in the sector and future plans for the bank. Edited Excerpts:
You are taking over at a time when the banking sector is facing a lot of challenges. What are your strategies to take Indian Bank forward?
The series of initiatives by the Government of India and RBI for resolution of stressed assets, especially the Insolvency & Bankruptcy Code (IBC), have started paying off. The year 2017-18 saw a few high-value NPA accounts being resolved and during the current financial year, it is banks are likely to make substantial recoveries from NPA accounts referred to IBC. True to its character of following a judicious approach, Indian Bank takes well-informed and well-reasoned business decisions on a case-to-case basis. Our focus is on further diversifying the loan book, to have an optimum mix of corporate and retail, agriculture and MSME (RAM) sector exposure.
Which are the key areas you would focus on for the bank's growth?
I would look at quality credit growth dispersed across agriculture, retail, MSME and corporate. Focus will be on achieving risk diversification across sectors and geographies. The continued thrust given to raising low-cost deposit resources through efficient deployment of technological capabilities and good customer service would certainly help our bank maintain a healthy interest spread.
Does the bank have enough capital to support growth? What are your expectations this year?
The bank is well capitalised today, both for meeting its regulatory and growth requirements. With headroom available for raising capital, options have been considered and approval from the board of directors and shareholders for raising equity capital in one or more tranches is available. The quantum and timing would be decided based on market conditions.
We have a board-approved business plan for 2018-19 along with relative strategies for achieving the plan.
As things stand now, we are adopting a three-pronged strategy of adding quality loan assets in the RAM sector and select corporates, increasing the share of CASA deposits and effective credit monitoring to prevent slippages / effect faster recoveries in NPA accounts. We are making all-out efforts to ensure all branches and zones play an active role in contributing to the bank's overall growth. We look at quality business growth with enhanced profitability.
For the present, my focus is on consolidating the gains of the past and further strengthening the financials of Indian Bank through qualitative business growth. We are aspiring to increase CASA deposits' share to about 45 per cent, improve RAM exposure and further prune NPA levels.
What are your thoughts on the proposed plan to merge PSU banks?
The amalgamations proposed in the PSB arena are aimed at creating banks with bigger balance sheet size, achieving economies of scale, and better risk diversification, without in any way diluting the national goal of inclusive-growth through effective use of technology.
How worrying are the NPA levels at Indian Bank? What are the recovery and upgradation targets?
Indian Bank's gross NPA and net NPA ratios are relatively better at 7.20 per cent and 3.79 per cent respectively as on June 30, 2018. We have an effective credit monitoring mechanism in place which will help to identify stress through capturing of early warning signals, taking timely corrective steps and thereby preventing slippages. Simultaneously, on the recovery front, a multi-pronged approach is being pursued. Making use of the recovery agents, classification of borrowers under Wilful Defaulter category on a case-to-case basis, invoking criminal clauses in such cases, setting up dedicated Stressed Asset Management (SAM) verticals at all important centres for exclusive monitoring and accelerating recovery in high value NPA accounts, are some of these. With resolution in a few NCLT accounts in the final stage, there are expectations of recovery in these accounts.
With the intervention of Government of India and RBI, the possible spiralling effect of the problems of NBFCs has been checked effectively. The initiatives taken are expected to restore and revamp the health of this sector. As far as Indian Bank is concerned, there are board-approved sector-wise exposure guidelines which includes the NBFC sector. Rather than a knee-jerk reaction, we are adopting a prudent approach towards lending to NBFCs on a case-to-case basis with good external rating, sound financials and efficient asset-liability management.