Expect 25% slippages from restructured book: South Indian Bank MD & CEO

The bank is targeting double digit growth, Murali Ramakrishnan, MD & CEO of South Indian Bank said

South Indian Bank may look to raise equity capital even if its capital adequacy ratio is healthy. The bank is targeting double-digit growth, Murali Ramakishnan, managing director (MD) & chief executive officer (CEO) said in an interview with Manojit Saha. Edited excerpts:

After two challenging years for the bank, the second quarter numbers are heartening. Do you expect the current financial year to be a normal one?

It would be a normal year as compared to the last two years, which were hit by Covid. Still, we have a little bit of abnormality because of the war (in Europe) and its impact on inflation around the world and India. Because of it, changes were brought by our central bank by continuously revising the repo rate. This means we have to constantly re-price both our assets and liabilities. And, we need to manage our spreads and slippages suitably. This is because when the repo rate goes up, the end rate for customers also goes up. So, he has to pay more for the same level of loan. On the other side — liabilities, customers may feel they are hit by inflation and they are unable to get real income. So, we have to keep revising the liability rate. We have to manage these things continuously.

What stress do you see in the restructured book? What percentage of the restructured book may slip into non-performing assets (NPAs)?

We have a restructured book of Rs 1,997 crore, and I expect 25 per cent slippages. In June end, the book was Rs 2,400 crore. I have guided for Rs 600 crore slippages from the restructured book and Rs 1,000 crore from the regular book. We are holding on to the same guidance.

Deposit growth was in the low single digits till the end of September. How do you plan to boost deposit growth?

We need to work on certain things — one is how sensibly we are raising deposits, how we are managing liquidity and how we can bring down the overall cost of funds. This means, I have to work on CASA (current account and savings account) deposits. CASA is now 34.5 per cent, which we want to take to 36 per cent in the next two-three quarters. We will calibrate our deposit growth in tune with asset growth.

What is your credit growth target for the current financial year?

I am looking at double-digit growth in the assets book. We ended last year at Rs 61,000 crore and the July-September quarter at Rs 67,000 crore. I am looking at Rs 71,000 crore by the end of the year.

Net interest margin for Q2 was 3.2 per cent but your guidance for FY23 is 3 per cent. Do you expect an increase in deposit rates to impact margins?

We have already increased the deposit rates and that is a continuous process. We are holding 2 to 3 asset-liability committee meetings every month.

The bank’s capital adequacy ratio, at 16 per cent, is much above the regulatory requirement. Do you still plan to raise capital?

If we continue to target double-digit growth, I am sure we need to carefully look at what kind of profits we are going to generate in the next two quarters and how our capital adequacy will look. We may have to raise capital. I have already got approval from the board to raise Rs 2,000 crore equity. We need to finalise the when and how much and what route.