 "Promoters want to maintain Lakshmi Vilas Bank's identity: Rakesh Sharma")
Rakesh Sharma, managing director and chief executive officer of Lakshmi Vilas Bank, took charge in March 2014, at a time when the lender was dealing with asset quality concerns and was seen as an acquisition target. In an interview with Nupur Anand, Sharma explains how the lender has diversified its board and the technology-related steps it has initiated, which will help the bank achieve higher growth in the coming years. Edited excerpts:
You had taken over at a time when the bank was grappling with mounting non-performing assets (NPAs). How far have you come in resolving the issues and how do you see it going ahead?
It's a continuous process. But, in the past year, there were several challenges. So, we decided that it will be a year of consolidation with reasonable growth. We have also tried to establish efficiency across parameters to ensure growth. When I took over, there was the issue of asset quality; on the liability front, low-cost deposits were a challenge. There was scope to also improve the income; so, we tried to focus on miscellaneous income. We have tried to overhaul the treasury department and that has helped us. We have also focused on introducing improved technology. This financial year, we plan to work on the same sections and bring about further improvement.
Our board was well-diversified but during the current year, we have taken steps to improve the mix further. We have inducted a former chairman and managing director of a public sector bank and two other members, who are from the information technology field. There is total professional management in the bank and we have recruited new team even in the management. Moreover, there is no interference from the board as such. It is a board-driven bank but day-to-day decisions and operations are taken care by the bank. So, there are no such issues.
What are the specific growth areas that you are looking at?
We want to increase the percentage of Casa (current account and savings account) deposit to total deposit by 2-3 per cent every year. On the advances front, our focus will be on retail and SME as their yield is better and the quality of advances will also be better. On the retail front, we are looking at starting loan against shares in a big way. Overall growth that we are targeting for the bank is 23 per cent and for retail and SME around 25 per cent.
What is the retail-corporate mix and do you see that changing going ahead?
Retail book is about 52 per cent, and 15 per cent is agriculture, which mainly include gold loans and the rest is corporate loan. We want to increase the retail mix to 60 per cent but that will happen gradually. We are growing even the corporate book but we are cautious on certain sectors such as steel. The old loans that were sanctioned are there but we haven't been staying away from sanctioning new loans.
Lakshmi Vilas Bank has been seen as an acquisition target by the industry. Do you plan to take the inorganic route?
In 2013-14, we opened 71 branches, last year we opened 38 and then this year we are opening 75 more branches this year. So, we are on a growth path and we want to grow in an organic way. Our promoters also want to maintain our identity as a bank. There are no such plans and neither are there any offers as of now.
Are you looking at raising more capital to fund growth?
We will need capital in the next six months to fund our growth. We haven't decided the amount yet but it is likely to be in the range of Rs 300-350 crore. We can either raise tier-1 or tier-2 capital because we have headroom available of Rs 400 crore for tier-2 as well. Last time we had raised capital via the rights issue so this time we can look at other options such as QIP or tier-2.
Are you looking at entering the credit card business?
Yes. A tie-up with a credit card company is in the final stages and we will be launching a co-branded credit card within a month or so. We are also not in the mobile banking space and will also be launching it soon.
You had taken over at a time when the bank was grappling with mounting non-performing assets (NPAs). How far have you come in resolving the issues and how do you see it going ahead?
It's a continuous process. But, in the past year, there were several challenges. So, we decided that it will be a year of consolidation with reasonable growth. We have also tried to establish efficiency across parameters to ensure growth. When I took over, there was the issue of asset quality; on the liability front, low-cost deposits were a challenge. There was scope to also improve the income; so, we tried to focus on miscellaneous income. We have tried to overhaul the treasury department and that has helped us. We have also focused on introducing improved technology. This financial year, we plan to work on the same sections and bring about further improvement.
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Apart from asset quality, the bank had also been grappling with governance issues. How far have those issues been addressed?
Our board was well-diversified but during the current year, we have taken steps to improve the mix further. We have inducted a former chairman and managing director of a public sector bank and two other members, who are from the information technology field. There is total professional management in the bank and we have recruited new team even in the management. Moreover, there is no interference from the board as such. It is a board-driven bank but day-to-day decisions and operations are taken care by the bank. So, there are no such issues.
What are the specific growth areas that you are looking at?
We want to increase the percentage of Casa (current account and savings account) deposit to total deposit by 2-3 per cent every year. On the advances front, our focus will be on retail and SME as their yield is better and the quality of advances will also be better. On the retail front, we are looking at starting loan against shares in a big way. Overall growth that we are targeting for the bank is 23 per cent and for retail and SME around 25 per cent.
What is the retail-corporate mix and do you see that changing going ahead?
Retail book is about 52 per cent, and 15 per cent is agriculture, which mainly include gold loans and the rest is corporate loan. We want to increase the retail mix to 60 per cent but that will happen gradually. We are growing even the corporate book but we are cautious on certain sectors such as steel. The old loans that were sanctioned are there but we haven't been staying away from sanctioning new loans.
Lakshmi Vilas Bank has been seen as an acquisition target by the industry. Do you plan to take the inorganic route?
In 2013-14, we opened 71 branches, last year we opened 38 and then this year we are opening 75 more branches this year. So, we are on a growth path and we want to grow in an organic way. Our promoters also want to maintain our identity as a bank. There are no such plans and neither are there any offers as of now.
Are you looking at raising more capital to fund growth?
We will need capital in the next six months to fund our growth. We haven't decided the amount yet but it is likely to be in the range of Rs 300-350 crore. We can either raise tier-1 or tier-2 capital because we have headroom available of Rs 400 crore for tier-2 as well. Last time we had raised capital via the rights issue so this time we can look at other options such as QIP or tier-2.
Are you looking at entering the credit card business?
Yes. A tie-up with a credit card company is in the final stages and we will be launching a co-branded credit card within a month or so. We are also not in the mobile banking space and will also be launching it soon.