After assuming the role of the convenor of the state-level bankers committee (SLBC) of the new state of Telangana, State Bank of Hyderabad (SBH) is now aiming for a diverse customer base, including those with deeper pockets in its traditional areas of Andhra Pradesh (AP) and Marathwada in addition to the home state. Splitting the branches to create spin-off places for the niche customers is one of the ideas that SBH is now trying to pursue across important towns and cities as the existing branches are clogged with mass banking activities, according to Santanu Mukherjee, managing director of SBH. Mukherjee, who took charge in July this year, shares with B Dasarath Reddy various steps being taken to achieve higher growth in income and profitability going forward. Edited excerpts:
What are the insights that you have gained from the recent Jan Sampark (outreach) programme taken up by the bank's top executives in the new state of Telangana?
I personally feel that SBH has lost a little bit of customer connect in Telangana. As we are a big bank here, we tend to think that it was the customers who need to come to us. Now I am saying ... do it the other way round as many of the private sector banks had already done it and because of that we had lost some of our business. We received a very good response from people across segments during our visits to the districts.
Public sector banks are the cheapest and the best. Same is true with SBH. Since we do a lot of other things like mass banking and agriculture lending, there is a large amount of clogging that's happening in our branches. This has made people, particularly those with deeper pockets, to feel out of place whenever they visit our branches. To address this problem, we are now trying to split the rural banking. We will have spin-off places exclusively meant for the niche people and the upper-end of the society located near these branches. Personal segments and part of MSMEs will be handled through these spin-offs. We will roll out the initiative slowly in all the important towns of Telangana, AP and Marathwada.
We are also a tech-savvy bank. We have already opened a few e-Connect centres where the customers can access basic services by using the machines. In effect, we are trying to get back to the customers by giving them better facilities and banking convenience in both the brick-and-mortar branches as well as electronic banking field.
What are the prospects of growth for credit in the remaining period of this year?
As far as the large corporates are concerned, there is not much of growth happening. In infrastructure and other projects, the credit growth happens only today, depending on what you have sanctioned a year or two years ago, because releases take place today. This pipeline had stopped somewhere last year as there was not much industrial growth and no new projects were forthcoming. Its effects are being felt this year. I think there will be a proper credit growth from the corporate sector from the June quarter next year. In March, we may see some growth on account of the utilisation of the previous sanctions.
During the ongoing MSME campaign, we have sourced Rs 2,000 crore (fresh applications for loans) in just one-and-a-half months starting October. Going forward, we see a very good growth in the MSME and retail segments. This year, we expect to achieve a growth of Rs 15,000 crore in total business, a 10-11 per cent year-on-year growth, while it would be another Rs 25,000 crore in business we expect to achieve in the next financial year.
What are the focus areas in terms of business and profitability?
Basically, SBH is a mid-segment retail bank and we want to keep our focus accordingly. About 55 per cent of our revenues come from retail and the remaining from larger accounts. In the commercial vertical, we have 10-12 branches located in big cities across India to take care of bigger advances. We have proposed to expand the retail network by adding 150 new branches this year, most of them in our traditional areas, where SBH brand equity is quite high. We have shed a lot of the high-cost and bulk deposits and we have also shed a large amount of low-yielding advances, which are at the base rate, as we wanted to trim the balance sheet. This has resulted in higher profits in the September quarter and we will have excellent growth rate in profits, going forward.
Are the NPAs still a major problem?
NPAs started swelling since last year and had reached the plateau in June this year. Of the total NPAs, around Rs 1,100 crore is in retail and around Rs 4,500 crore in large accounts. We were able to reduce the NPA levels in the September quarter though we cannot overnight to do anything in this regard except trying to control them. As you see, the additional requirement for provisioning has come down while income had gone up, resulting in better profits in the September quarter. This trend will continue.
Do you see any requirement for additional capital this year or the next?
We might go for Tier-II bonds next year to enhance our capital adequacy ratio (CAR) position but as of now there is no requirement. If we could achieve good profits this year, there will be no additional requirement to raise either Tier-I or Tier-II capital in the next year as well.
What are the insights that you have gained from the recent Jan Sampark (outreach) programme taken up by the bank's top executives in the new state of Telangana?
I personally feel that SBH has lost a little bit of customer connect in Telangana. As we are a big bank here, we tend to think that it was the customers who need to come to us. Now I am saying ... do it the other way round as many of the private sector banks had already done it and because of that we had lost some of our business. We received a very good response from people across segments during our visits to the districts.
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What strategies are you adopting to regain the lost business?
Public sector banks are the cheapest and the best. Same is true with SBH. Since we do a lot of other things like mass banking and agriculture lending, there is a large amount of clogging that's happening in our branches. This has made people, particularly those with deeper pockets, to feel out of place whenever they visit our branches. To address this problem, we are now trying to split the rural banking. We will have spin-off places exclusively meant for the niche people and the upper-end of the society located near these branches. Personal segments and part of MSMEs will be handled through these spin-offs. We will roll out the initiative slowly in all the important towns of Telangana, AP and Marathwada.
We are also a tech-savvy bank. We have already opened a few e-Connect centres where the customers can access basic services by using the machines. In effect, we are trying to get back to the customers by giving them better facilities and banking convenience in both the brick-and-mortar branches as well as electronic banking field.
What are the prospects of growth for credit in the remaining period of this year?
As far as the large corporates are concerned, there is not much of growth happening. In infrastructure and other projects, the credit growth happens only today, depending on what you have sanctioned a year or two years ago, because releases take place today. This pipeline had stopped somewhere last year as there was not much industrial growth and no new projects were forthcoming. Its effects are being felt this year. I think there will be a proper credit growth from the corporate sector from the June quarter next year. In March, we may see some growth on account of the utilisation of the previous sanctions.
During the ongoing MSME campaign, we have sourced Rs 2,000 crore (fresh applications for loans) in just one-and-a-half months starting October. Going forward, we see a very good growth in the MSME and retail segments. This year, we expect to achieve a growth of Rs 15,000 crore in total business, a 10-11 per cent year-on-year growth, while it would be another Rs 25,000 crore in business we expect to achieve in the next financial year.
What are the focus areas in terms of business and profitability?
Basically, SBH is a mid-segment retail bank and we want to keep our focus accordingly. About 55 per cent of our revenues come from retail and the remaining from larger accounts. In the commercial vertical, we have 10-12 branches located in big cities across India to take care of bigger advances. We have proposed to expand the retail network by adding 150 new branches this year, most of them in our traditional areas, where SBH brand equity is quite high. We have shed a lot of the high-cost and bulk deposits and we have also shed a large amount of low-yielding advances, which are at the base rate, as we wanted to trim the balance sheet. This has resulted in higher profits in the September quarter and we will have excellent growth rate in profits, going forward.
Are the NPAs still a major problem?
NPAs started swelling since last year and had reached the plateau in June this year. Of the total NPAs, around Rs 1,100 crore is in retail and around Rs 4,500 crore in large accounts. We were able to reduce the NPA levels in the September quarter though we cannot overnight to do anything in this regard except trying to control them. As you see, the additional requirement for provisioning has come down while income had gone up, resulting in better profits in the September quarter. This trend will continue.
Do you see any requirement for additional capital this year or the next?
We might go for Tier-II bonds next year to enhance our capital adequacy ratio (CAR) position but as of now there is no requirement. If we could achieve good profits this year, there will be no additional requirement to raise either Tier-I or Tier-II capital in the next year as well.