 "We'll take bulk deposits only if absolutely necessary: Ashwani Kumar")
State-run Dena Bank was able to contain slippages but saw a few large accounts slip into the non-performing asset (NPA) category during the third quarter of FY14. Ashwani Kumar, chairman and managing director of Dena Bank, shares the bank’s focus areas with Manojit Saha. Excerpts:
Dena Bank’s loan growth was lower than the industry for the past year. What has been the main reason for the same? Do you see growth picking up?
Our credit growth was 11 per cent till December 2013 on a 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. Demand from large corporate houses for loans has been sluggish, so we are focusing more on retail and small and medium enterprises. Our credit growth was 25 per cent in the MSME (micro, small and medium enterprises) segment and 20 per cent in the small retail borrower category. We may end this financial year with around 15 per cent growth in advances. The deposit growth may be a tad lower than credit credit.
At present, the share of retail in total advances is 12.55 per cent, which is a 90 basis-point increase over the last nine months. We plan to increase it to 20 per cent over the next two-to-three years. By the end of March 2014, we aim to grow it to 14 per cent.
You recently launched a new deposit scheme offering 9.15 per cent 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 avoid taking bulk deposits, which are quoting around 9.50 per cent (one 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 account and savings account (Casa), or low-cost, deposits, where the bank lags its 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 deposits and term deposits. In addition, we also have the swipe facility for our customers, which automatically converts savings-account deposits to term deposits. At present, Casa deposits constitute 29 per cent of the total deposits, which we are trying to increase to above 30 per cent.
Despite lower Casa, you were able to improve the net interest margins (NIMs)...
Yes, NIMs have gone up by 10 basis points (bps) during the third quarter compared to the previous two quarters. We see another 10 bps rise in the fourth quarter, which will take our NIM to 2.75 per cent.
The bank’s NPA ratio has declined sequentially though it has gone up on a year-on-year basis. Have you been able to contain slippages?
The net increase in slippages was less than Rs 100 crore for the third quarter, which is mainly due to upgradation and recovery of many accounts. There were some large accounts which slipped during the quarter. We don’t see such lumpy accounts which are under pressure this quarter. We have been able to contain slippages of smaller accounts. Our effort is to keep gross and net NPA below three per cent and two per cent, respectively, by March 31.
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 the Life Insurance Corporation of India for raising both debt and equity. By March-end, we plan to raise around Rs 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 the government last December, its stake in the bank has increased to 66 per cent from 55 per cent, which gives us headroom to dilute the stake for raising capital.
Dena Bank’s loan growth was lower than the industry for the past year. What has been the main reason for the same? Do you see growth picking up?
Our credit growth was 11 per cent till December 2013 on a 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. Demand from large corporate houses for loans has been sluggish, so we are focusing more on retail and small and medium enterprises. Our credit growth was 25 per cent in the MSME (micro, small and medium enterprises) segment and 20 per cent in the small retail borrower category. We may end this financial year with around 15 per cent growth in advances. The deposit growth may be a tad lower than credit credit.
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Since the thrust is on retail, how do you see the retail book growing?
At present, the share of retail in total advances is 12.55 per cent, which is a 90 basis-point increase over the last nine months. We plan to increase it to 20 per cent over the next two-to-three years. By the end of March 2014, we aim to grow it to 14 per cent.
You recently launched a new deposit scheme offering 9.15 per cent 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 avoid taking bulk deposits, which are quoting around 9.50 per cent (one 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 account and savings account (Casa), or low-cost, deposits, where the bank lags its 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 deposits and term deposits. In addition, we also have the swipe facility for our customers, which automatically converts savings-account deposits to term deposits. At present, Casa deposits constitute 29 per cent of the total deposits, which we are trying to increase to above 30 per cent.
Despite lower Casa, you were able to improve the net interest margins (NIMs)...
Yes, NIMs have gone up by 10 basis points (bps) during the third quarter compared to the previous two quarters. We see another 10 bps rise in the fourth quarter, which will take our NIM to 2.75 per cent.
The bank’s NPA ratio has declined sequentially though it has gone up on a year-on-year basis. Have you been able to contain slippages?
The net increase in slippages was less than Rs 100 crore for the third quarter, which is mainly due to upgradation and recovery of many accounts. There were some large accounts which slipped during the quarter. We don’t see such lumpy accounts which are under pressure this quarter. We have been able to contain slippages of smaller accounts. Our effort is to keep gross and net NPA below three per cent and two per cent, respectively, by March 31.
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 the Life Insurance Corporation of India for raising both debt and equity. By March-end, we plan to raise around Rs 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 the government last December, its stake in the bank has increased to 66 per cent from 55 per cent, which gives us headroom to dilute the stake for raising capital.