Interview: We’re ready for growth now, says Padmaja Chunduru, MD & CEO, Indian Bank
While merging with Allahabad Bank proved to be a difficult year, the combined entity is ready to make the most of its pan-Indian presence and greater reach, Padmaja Chunduru, MD & CEO, Indian Bank, says Sajan C Kumar. Extracts:
How difficult has the process of merging with Allahabad Bank been, especially amid the pandemic?
The Covid-19 crisis struck in the middle of Allahabad Bank’s merger process with Indian Bank, forcing us to put to use all the experience and skills we have gained over the years. For this expertise, I would like to thank SBI and Indian Bank which served as my training ground. We could not have moved or transferred the people the merger process called in during a public crisis. IT integration was another challenge. If we were able to carry out the exercise, it is only thanks to the continuous communication between the banks. Planning is one thing, but execution is another. You need to keep checking to see if everything is going according to plan.
What are your priorities for overall credit growth and business generation in FY22?
With the merger process executed successfully, we have a pan-Indian presence and that makes us much more confident about our prospects. We now have a solid presence and will benefit from a better customer connection, a greater number of branches, Internet and mobile banking and, above all, commercial correspondents (CB) providing us with at least 20,000 points. of contact.
I think Indian Bank is about to take advantage of the position it is currently in. Our business has grown steadily in the first three quarters of FY21 and the NPA numbers are on a downward trajectory. We have a RAM portfolio (retail, agriculture and MSME) of 56% and a corporate portfolio of 44%, which is a good mix. There is enough room for improvement in each of these segments, however, with the combined balance sheet giving us adequate exposure to well-rated companies, the corporate side is stronger.
What would be your lending strategy? With RAM now making up the largest part, are there any plans to increase the company’s share?
We positioned the bank to take advantage of business lending opportunities, both funded and unfunded, by creating 14 large branches and 38 medium-sized branches. We have taken out membership in a working capital consortium and term loans to well-rated and well-known companies. We expect the business portfolio to grow 12% over the next fiscal year. In the third quarter of this fiscal year, we could grow the corporate pie by 7% when business was sluggish. We also dug a mid-business vertical to focus on the Rs 150-500 crore segment. In business loans, you have to choose wisely. Sponsor’s references are important when granting a business loan. In the RAM segment, where we are the market leader, we expect growth of 12-14% over the next fiscal year.
Having a tight leash on NPAs and having a solid recovery process in place is essential these days. What are your plans on these fronts?
Stopping slippages and speeding up recoveries are part of the bank’s DNA. In the two and a half years that I have been at the bank, the slippages have diminished quarter after quarter. For recovery, we have two teams, one working in Chennai and the other in Kolkata. We hope to recover Rs 2,000 crore without NCLT and after factoring in this process the figure will be around Rs 4,500 crore by the end of this year. We also conduct electronic auctions of real estate and other recoveries under the Sarfaesi Law and the exercise is gradually gaining ground. We’re also going back to door-to-door visits by CEO level managers to collect small loans. It is a sort of name-shame strategy to pressure defaulters to pay their dues.
What is your current capital ratio? Are there any plans to raise capital?
The capital adequacy ratio for the December quarter was 14.16% and even if you factor in the standstill period NPAs, it would only drop by 10 to 15 basis points. In addition, this does not include the Rs 2,000 crore that we raised in January 2021. If this is included, it will go beyond 14%. We are doing two things now.
First, we monitor our asset portfolio to assess which risk-weighted assets are and which is optimized or controlled accordingly. Second, we raised Rs 4,000 crore and the board of directors approved a further capital increase of around Rs 4,000 crore through QIP, FPO or other means. We hope that the bank’s share price will soon reach its book value and we can opt for the capital increase by the first quarter of next fiscal year.