 "Would not like to spread wings outside, for now: H S Upendra Kamath")
The former managing director of Vijaya Bank, H S Upendra Kamath, took over as managing director and chief executive officer of the 93-year old private sector lender Tamilnad Mercantile Bank (TMB) four days ago. The Tuticorin-based TMB is said to be controlled by the Nadar community in the state. In an interview with T E Narasimhan, he spoke about his vision and challenges. Edited excerpts:
What are the things that require immediate attention at TMB?
It is true that the bank’s operations are largely confined to the southern part of the country, which also means by implication, there is an immense scope to spread wings outside the southern states. Even in the southern states, our presence in the neighbouring states is limited. Therefore, it offers a great opportunity to expand our branch network and evolve it as a pan-India bank over a period of time.
Last year, TMB opened 50 branches and this year’s plan is being finalised. It needs the board's approval now. Our intention is to make it a national bank in a phased and gradual way. This is what the bank should do immediately in my opinion and it is an important thing to achieve. We have licence and permission for 20 branches, which will be opened in the next two-three months.
Additionally, we will look at some more centres. We will be trying to have slightly higher numbers than last year. Currently, we have 382 branches, of which 304 are in Tamil Nadu, the rest being in other southern states. We are looking at Maharashtra, Gujarat and some potential centres up north, Andhra Pradesh, Kerala and Karnataka.
Would you look at expanding in neighbouring countries, where the Nadar diaspora is strong?
I would not like to spread wings outside, for now. We have enough to do within the country.
TMB is known as a bank of the Nadar community. Do you think that is good for the bank?
I wouldn’t like to comment on that since it is early days. Whatever legacy the bank has had, that will continue. Irrespective of who had set up the bank, we will take forward this great legacy and brand value and further build on that.
What will be your focus sectors?
I am sharing my personal thoughts with you and some of them are subject to the board's approval. Growth drivers in TMB will continue to be agriculture, retail lending and the MSMEs. That doesn’t mean we should not expand our operations to mid-corporates and big ones. That is something which we are very keen on foraying into in a very calibrated and careful way.
How do you see the NPA levels?
TMB's NPA till March 2013 was very small, absolutely not a cause of concern at all. In the year ended March 2014, there was some deterioration in quality and we are currently at 2.5-2.6 per cent gross NPA. In terms of absolute numbers, it was around Rs 380 crore as of June. This is not an alarming situation at all. The industry average is 3.9 per cent. Whatever NPA surfaced, we are tackling it by trying to understand what exactly is disturbing the borrower, and how we can help them.
We are looking at whether we can handhold them, how to make them viable by nursing them, and if it is not possible, whether we can restructure the loans and give them some extended time frame for them to have adequate revenues to come back and be viable. We can look at the possibilities of one-time settlement, if nothing else is possible. Our endeavour is to try salvaging the situation so that the efforts that went into the business don’t go waste.
What are the challenges you foresee?
We are not into mid-corporate and corporate lending. This segment needs special skill sets, which need to be built. We do have some skill sets. We need to build upon that and create enough cadres and bench strength to manage these proposed activities. Centralisation of process is the second. Even in the existing activities like retail, there is a need for centralised loan processing so that turnaround time gets compressed.
The third thing is we need to contain cost of funds, and that is possible only if we have a decent CASA portfolio, which, at present, is low compared to peer banks. The fourth issue which needs attention, though I don’t call it as a challenge, is that if we have eventually spread our wings outside Tamil Nadu in a big way recruitment etc., need to keep pace with the expansion plan.
What are the business targets for TMB this fiscal year?
By March 2015, we want to close with Rs 50,000 crore of total business, including Rs 27,500 crore of deposits, Rs 22,500 crore of advances. In the quarter ending June, we are negative, due to withdrawal of bulk deposits in a few places. It would be marginally lower than March quarter, and nothing alarming. In the nine month time frame, we should be able to overcome it and move towards to the target. We are hopeful that we should be able to reach out to the target. I see a great upside in this bank, and I don’t see being small as an issue. On the other hand, it offers immense opportunities for growth.
What are the capital requirements for the bank?
We have 15 per cent CAR as far as Basel III is concerned, as on March. For us, capital is not a constraint.
How do you see the Union Budget?
The government did a fairly good job. Lots of positives are there in the Budget. Allotments and relief for infrastructure, ARCs to help power generation companies, initiatives taken on agriculture, special interest sub invention for prompt repayments, investment allowance for MSMEs are some of the important key. On the social sector, setting up AIIMS, IIMs and IITs are positive moves.
For banking sector, the most important thing is that the long-term fund, which we are raising for the purpose of lending to infrastructure, is exempted from SLR and CRR. That brings down the cost. Today, 100 per cent of the amount you borrowed is available to lend for infrastructure. Thus, the overall yields will go up.
What are the things that require immediate attention at TMB?
It is true that the bank’s operations are largely confined to the southern part of the country, which also means by implication, there is an immense scope to spread wings outside the southern states. Even in the southern states, our presence in the neighbouring states is limited. Therefore, it offers a great opportunity to expand our branch network and evolve it as a pan-India bank over a period of time.
Last year, TMB opened 50 branches and this year’s plan is being finalised. It needs the board's approval now. Our intention is to make it a national bank in a phased and gradual way. This is what the bank should do immediately in my opinion and it is an important thing to achieve. We have licence and permission for 20 branches, which will be opened in the next two-three months.
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Additionally, we will look at some more centres. We will be trying to have slightly higher numbers than last year. Currently, we have 382 branches, of which 304 are in Tamil Nadu, the rest being in other southern states. We are looking at Maharashtra, Gujarat and some potential centres up north, Andhra Pradesh, Kerala and Karnataka.
Would you look at expanding in neighbouring countries, where the Nadar diaspora is strong?
I would not like to spread wings outside, for now. We have enough to do within the country.
TMB is known as a bank of the Nadar community. Do you think that is good for the bank?
I wouldn’t like to comment on that since it is early days. Whatever legacy the bank has had, that will continue. Irrespective of who had set up the bank, we will take forward this great legacy and brand value and further build on that.
What will be your focus sectors?
I am sharing my personal thoughts with you and some of them are subject to the board's approval. Growth drivers in TMB will continue to be agriculture, retail lending and the MSMEs. That doesn’t mean we should not expand our operations to mid-corporates and big ones. That is something which we are very keen on foraying into in a very calibrated and careful way.
How do you see the NPA levels?
TMB's NPA till March 2013 was very small, absolutely not a cause of concern at all. In the year ended March 2014, there was some deterioration in quality and we are currently at 2.5-2.6 per cent gross NPA. In terms of absolute numbers, it was around Rs 380 crore as of June. This is not an alarming situation at all. The industry average is 3.9 per cent. Whatever NPA surfaced, we are tackling it by trying to understand what exactly is disturbing the borrower, and how we can help them.
We are looking at whether we can handhold them, how to make them viable by nursing them, and if it is not possible, whether we can restructure the loans and give them some extended time frame for them to have adequate revenues to come back and be viable. We can look at the possibilities of one-time settlement, if nothing else is possible. Our endeavour is to try salvaging the situation so that the efforts that went into the business don’t go waste.
What are the challenges you foresee?
We are not into mid-corporate and corporate lending. This segment needs special skill sets, which need to be built. We do have some skill sets. We need to build upon that and create enough cadres and bench strength to manage these proposed activities. Centralisation of process is the second. Even in the existing activities like retail, there is a need for centralised loan processing so that turnaround time gets compressed.
The third thing is we need to contain cost of funds, and that is possible only if we have a decent CASA portfolio, which, at present, is low compared to peer banks. The fourth issue which needs attention, though I don’t call it as a challenge, is that if we have eventually spread our wings outside Tamil Nadu in a big way recruitment etc., need to keep pace with the expansion plan.
What are the business targets for TMB this fiscal year?
By March 2015, we want to close with Rs 50,000 crore of total business, including Rs 27,500 crore of deposits, Rs 22,500 crore of advances. In the quarter ending June, we are negative, due to withdrawal of bulk deposits in a few places. It would be marginally lower than March quarter, and nothing alarming. In the nine month time frame, we should be able to overcome it and move towards to the target. We are hopeful that we should be able to reach out to the target. I see a great upside in this bank, and I don’t see being small as an issue. On the other hand, it offers immense opportunities for growth.
What are the capital requirements for the bank?
We have 15 per cent CAR as far as Basel III is concerned, as on March. For us, capital is not a constraint.
How do you see the Union Budget?
The government did a fairly good job. Lots of positives are there in the Budget. Allotments and relief for infrastructure, ARCs to help power generation companies, initiatives taken on agriculture, special interest sub invention for prompt repayments, investment allowance for MSMEs are some of the important key. On the social sector, setting up AIIMS, IIMs and IITs are positive moves.
For banking sector, the most important thing is that the long-term fund, which we are raising for the purpose of lending to infrastructure, is exempted from SLR and CRR. That brings down the cost. Today, 100 per cent of the amount you borrowed is available to lend for infrastructure. Thus, the overall yields will go up.