Vijaya Bank, which has declared this the ‘year of retail and recovery’, has set a target to grow its retail segment by 22 per cent. It also aims to recover Rs 1,000 crore of bad loans. H S Upendra Kamath, chairman and managing director, talks to Debasis Mohapatra on concerns and prospects. Edited excerpts:
What is your outlook on NPA (non-performing assets) movement?
Vijaya is among the few banks to have started tracking NPA accounts (systematically). Though the Reserve Bank of India (RBI) has extended compliance time to September from March (for provisioning on bad loans), we completed the process by March. Our balance sheet has been cleaned up fully. Going forward, slippages will not go northward. Therefore, our entire team is now focusing on the recovery. We have also declared the current year as the year of recovery.
What is the recovery target?
We are aiming at doubling our recovery ratio in the current financial year. In 2011-12, the recovery and reconstruction target is Rs 1,000 crore. We’re looking at a gross NPA ratio of less than two (per cent) and net NPA ratio of less than one (per cent) in this year.
What are you doing to ramp up the retail base?
We want to scale up our retail growth rate to 20 per cent from a modest 7.5 per cent last year. We’ve opened 11 retail asset centralised processing centers for loan disbursement to customers. The bank is also following a ‘feet on the street’ model for sanctioning various kinds of retail loans. Recently, part of the processing work was outsourced to speed up this loan processing time. Also, we have started giving in-principle approval for housing loans. The bank will also open SME (small and medium enterprises) loan processing centres soon in Delhi, Bangalore and Mumbai.
What is your credit and deposit growth expectation?
Last fiscal, the bank attained a credit growth rate of 18 per cent and this year we hope to increase it to 22 per cent. Deposit growth is expected to be 20 per cent.
What about yield on advances? Will the cost of deposits go up?
Yield on advances will be around 10.5 per cent this year. The cost of deposits will go up slightly, as the bank has taken some high-cost deposits during the fourth quarter of last year. We have also raised deposit rates in the recent past, which will push up cost of deposits marginally.
How do you see the interest rate regime? Will net interest margin be hit?
Presently, interest rates have an upward bias. RBI has already raised policy rates nine times in the past 14 months. I don’t see inflation moderating in the next nine months. We have already revised our base rate upwards. So, part of the interest rate rise has already been passed on to the customer. On NIMs, I don’t see any impact in the current fiscal. We will maintain it at around three per cent.
Will you look at setting up a housing subsidiary or an asset management company? What are your plans in the insurance segment after the exit of Punjab National Bank from the earlier JV?
The bank is not looking at a housing finance company. With our more than 1,200 branches, we can do it better through our branches than setting up a separate subsidiary. Nor are we mulling a separate asset management company. However, we are open to looking at a possibility of a tie-up in life insurance after the exit of Punjab National Bank from the joint venture agreement.