Q&A: M Narendra, CMD, Indian Overseas Bank

'We expect 25% credit growth in 2011-12'

At a time when banks are reducing the size of their loan books, Chennai-based public lender Indian Overseas Bank (IOB) saw its advances portfolio growing by more than Rs 5,000 crore in the first quarter. In an interview with Malvika Joshi, Chairman and Managing Director M Narendra says the bank aims to grow its assets by 25 per cent in the current financial year. Edited excerpts:

Most banks have been reducing their loan books in the first quarter. But you have increased your advances by Rs 5,357 crore. In a scenario of high interest rates, how do you plan to sustain such loan growth?
First, we had total undisbursed loans of Rs 27,000 crore from last year and this would be availed of, according to the original project schedules. Second, we would continue to give loans to micro small and medium scale enterprises and the agricultural sector, according to our targets. These businesses are in locations that are not much impacted by the current macro-economic situation and since we offer them a preferred interest rate, the credit demand will not come down much. Also, with the opening of additional branches, we expect credit growth of 25 per cent, against the industry's projected average of 18 per cent.

 

How do you plan to maintain margins, since attractive interest rates lure customers towards fixed deposits?
We aim to maintain our net interest margins (NIM) by increasing our low-cost deposits, or the current account and savings account (Casa) deposits. Although our percentage of Casa deposits to total deposits has fallen from 33 per cent in June 2010 to 27 per cent, due to the high deposit rates this quarter, we would garner more Casa deposits by opening new branches and accounts. We aim to maintain NIM at no less than 2.8 per cent throughout 2011-12.

IOB's non-performing assets (NPAs) have declined. However, with fears of a slowdown and increased borrowing costs, how do you plan to maintain the quality of assets?
The market is not in a very good shape, compared to the scenario last year, due to international and domestic factors. We have been able to recover a lot of bad debts from last year and are confident of offsetting the incremental slippages by incremental recoveries.

What has been the progress on the implementation of system identification of NPAs? How do you think your slippages would be hit?
We will be able to meet the September deadline given by the government to complete system recognition of NPAs. As of now, accounts up to Rs 50 lakh, along with bigger accounts, have been completed. As far as slippages are concerned, they have come down from Rs 850 crore in March to Rs 458 crore this quarter. Our NPAs have also come down. However, with the system recognition system, there would be pressure on NPAs and we would have to be watchful.