 "Murali M Natrajan")
After years of non-performance and low profitability, DCB Bank now appears to have put its house in order. The lender has started making profits, improved its asset quality and strengthened its capital base. Murali M Natrajan, MD & CEO, DCB Bank, in an interview with Somasroy Chakraborty, says the lender now aims to double its balance sheet size in the next three to three-and-a-half years. Edited excerpts:
Will you continue to expand branch network and increase headcount aggressively?
We are adding 30-35 branches every year, of which, close to 50 per cent are in tier-II and tier-VI locations. At the end of September 2014, we had 142 branches. We have seen that new branches take 18-22 months to break-even. If we find that break-even is taking longer than that, we will calibrate our expansion. We believe that there are business opportunities and it is only a question of how long it will take to realise those opportunities. We had 3,184 employees at the end of the last quarter. If we continue to add 30-35 branches annually, we will need to add 250-300 people every year.
Won’t it deteriorate your cost-to-income ratio?
Our cost-to-income ratio is currently in the range of 60-63 per cent. Our aim is to bring it down to 50 per cent. Since we are still investing in building our distribution network, I don’t think we will be able to reduce it to below 50 per cent in next five years.
Are you comfortable with the health of your assets?
So far, we have been able to prevent any significant deterioration in our asset quality. The gross NPA (non-performing asset) ratio was 1.9 per cent, while the net NPA ratio was at 1.07 per cent at the end of September 2014. We have been measured in our exposure to large corporates. Our focus on secured retail lending has also helped.
Will you continue to focus on retail lending?
Mortgages — home loan and loan against property — currently account for 40 per cent of our advances. We will continue to focus on this segment. Our aim is to double the balance sheet in next 36-42 months. We are not too keen to enter unsecured retail credit.
Have you prepared a new roadmap to cut promoters' stake in DCB Bank to 10 per cent?
We have raised tier-I capital of around Rs 250 crore through an offer of equity shares under qualified institutional placement, which was completed on October 10, 2014. Following the capital raising exercise the promoters’ stake in the bank has reduced to 16.4 per cent from 18.5 per cent earlier. We were supposed to reduce the promoters’ stake in the bank to 10 per cent by March, 2014. We are in correspondence with the Reserve Bank of India and seeking the regulator’s guidance to prepare a new roadmap to bring down the promoters’ stake in the bank.
Is there a scope for DCB Bank to lower its deposit and lending rates?
While we find that short-term interest rates are coming down, long-term rates are still remaining stable. But I believe that deposit rates are heading southwards. If deposit rates are lowered, base rate will also get reduced.
