 "We are able to contain slippages of small accounts: Ashwini Kumar")
State-run lender Dena Bank was able to contain slippages but seen few large accounts slipping into NPA category during the third quarter. Ashwini Kumar, chairman and managing director of Dena Bank shares the banks focus areas going ahead with Manojit Saha in an interview. Excerpts:
Dena Bank’s loan growth was lower than the industry for the last one year. What has been the main reason for it? Do you see growth picking up, going ahead?
Our credit growth was 11% till December on year-on-year basis, which is lower than the industry growth. One reason was Rs 1,300 crore was transferred from loan book to investment book – as a part of state electricity board debt recast plan.
Since the thrust is on retail, how do you see the retail book growing?
At present, the share of retail in total advances 12.55% which is 90 bps increase over the last nine months. We plan to increase it to 20% over the next two to three years. By end of March 2014, we aim to growth it to 14%.
You have recently launched new deposit scheme offering 9.15% for 444 days. What was the reason for that?
The aim is to attract retail depositors amid high inflation. In addition, this will help us to avoid taking bulk deposits which quoting around 9.50% (1 year maturity). We will not take bulk deposits if it is absolutely not necessary.
What are the efforts you are taking to improve the share of current and savings account deposits that is, the low cost deposits, in which the bank is slightly behind among peers?
The growth in Casa is a cause of concern, as it has not grown very satisfactorily. This is mainly because the interest rate differential was very significant between savings account deposit and term deposits.
In addition, we also have swipe facility for our customers, which automatically convert savings account deposit to term deposits. At present, Casa deposits constitute 29% of total deposits, which we are trying to increase above 30%.
Despite lower Casa, you were able to improve the net interest margins...
Yes, NIMs have gone up by 10 bps during the third quarter as compared to the previous two quarters. We see another 10 bps rise in the fourth quarter which will take our NIM to 2.75%.
The bank’s non-performing asset ratio has declined sequentially though it has gone up on year-on-year basis. Have you been able to contain slippages?
The net increase in slippages were less than Rs 100 crore for the third quarter which is mainly due to upgradation and recovery of many account. There were some large accounts which has slipped during the quarter.
We don’t see such lumpy account this quarter which are under pressure. We have been able to contain slippages of smaller accounts. Our effort is to keep gross and net NPA below 3% and 2% respectively by 31 March.
How much is the debt restructuring pipeline?
This quarter, we expect about Rs 600 crore to be restructured.
The bank has decided to defer fund raising plan via the qualified institutional placement route. What are the other options you are mulling for raising both equity and debt capital?
We are in talks with Life Insurance Corporation of India (LIC) for raising both debt and equity. By March end we plan to raise around 800 crore via tier-II bonds and another Rs 400 crore via preferential allotment of equity shares to LIC.
Following the Rs 700 crore equity infusion by government last December, its stake in the bank has increased to 66% from 55% which gies us headroom to dilute the stake for raising capital.
Dena Bank’s loan growth was lower than the industry for the last one year. What has been the main reason for it? Do you see growth picking up, going ahead?
Our credit growth was 11% till December on year-on-year basis, which is lower than the industry growth. One reason was Rs 1,300 crore was transferred from loan book to investment book – as a part of state electricity board debt recast plan.
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Demand from large corporate houses for loans have been sluggish so we are focussing more on retail and small and medium enterprises. Our credit growth was 25% in the MSME segment and 20% in the small retail borrower category. We may end this financial year with around 15% growth in advances. The deposit growth may be a tad lower than credit.
Since the thrust is on retail, how do you see the retail book growing?
At present, the share of retail in total advances 12.55% which is 90 bps increase over the last nine months. We plan to increase it to 20% over the next two to three years. By end of March 2014, we aim to growth it to 14%.
You have recently launched new deposit scheme offering 9.15% for 444 days. What was the reason for that?
The aim is to attract retail depositors amid high inflation. In addition, this will help us to avoid taking bulk deposits which quoting around 9.50% (1 year maturity). We will not take bulk deposits if it is absolutely not necessary.
What are the efforts you are taking to improve the share of current and savings account deposits that is, the low cost deposits, in which the bank is slightly behind among peers?
The growth in Casa is a cause of concern, as it has not grown very satisfactorily. This is mainly because the interest rate differential was very significant between savings account deposit and term deposits.
In addition, we also have swipe facility for our customers, which automatically convert savings account deposit to term deposits. At present, Casa deposits constitute 29% of total deposits, which we are trying to increase above 30%.
Despite lower Casa, you were able to improve the net interest margins...
Yes, NIMs have gone up by 10 bps during the third quarter as compared to the previous two quarters. We see another 10 bps rise in the fourth quarter which will take our NIM to 2.75%.
The bank’s non-performing asset ratio has declined sequentially though it has gone up on year-on-year basis. Have you been able to contain slippages?
The net increase in slippages were less than Rs 100 crore for the third quarter which is mainly due to upgradation and recovery of many account. There were some large accounts which has slipped during the quarter.
We don’t see such lumpy account this quarter which are under pressure. We have been able to contain slippages of smaller accounts. Our effort is to keep gross and net NPA below 3% and 2% respectively by 31 March.
How much is the debt restructuring pipeline?
This quarter, we expect about Rs 600 crore to be restructured.
The bank has decided to defer fund raising plan via the qualified institutional placement route. What are the other options you are mulling for raising both equity and debt capital?
We are in talks with Life Insurance Corporation of India (LIC) for raising both debt and equity. By March end we plan to raise around 800 crore via tier-II bonds and another Rs 400 crore via preferential allotment of equity shares to LIC.
Following the Rs 700 crore equity infusion by government last December, its stake in the bank has increased to 66% from 55% which gies us headroom to dilute the stake for raising capital.