South Indian Bank is looking to expand beyond Kerala, says MD & CEO

The bank is also shifting its focus on loan mix to micro small and medium enterprises (MSMEs) and retail, from the current bias towards corporates

Thrissur-based South Indian Bank is looking to expand beyond Kerala. The lender is also shifting its focus on loan mix to micro small and medium enterprises (MSMEs) and retail, from the current bias towards corporates, the bank’s managing director and chief executive officer PR Seshadri said in an exclusive telephonic interview with Shine Jacob. Edited Excerpts:

Growth during the first quarter has also come from corporates at over 40 per cent, while you were betting big on MSMEs and retail. What’s your loan mix strategy like?

We have a two pronged strategy. One is to make our branches more efficient and ensure that we can deliver great products and services from the branches. Through this we can increase productivity of our staff, which will enable us to deliver more MSME loans, more retail loans and so on. We are building a series of new systems between now and February of next year, which will change the way we interact with our customers. Through this, we can get more MSME and retail loans. 

In the interim, we are still using corporate as a load balancer to ensure that our balance sheet continues to move forward. We are cognizant to the fact that the corporate credit cycle is in a relatively benign phase at this point of time. Therefore, from a risk point of view, exposure to corporate segment is satisfactory. That is the strategy we are using. 

We want to rebalance this book in such a fashion that corporate exposure is roughly a third of our total exposure and the other two-thirds cone from retail, MSME, agri and other components. 

As far as MSMEs are concerned, 78 per cent of your business is coming from South India. How are you planning to take it forward?

Our aim is to have a more balanced growth on MSME exposure. Our focus will be to grow our exposure to select areas beyond South India. We have Andhra Pradesh, Telangana, Tamil Nadu, and Karnataka, where there is a large opportunity. 

We want to take advantage of the business opportunities that are closer home as well as to do businesses in certain geographies with potential, like Maharashtra, Gujarat, Delhi-National Capital Region, as we have substantial knowledge about these markets. 

Overtime, reliance on Kerala will plateau and other areas will grow. That is a strategic direction that we have taken. Currently, the MSME sector is around 17-18 per cent of our total loan mix, we want it to be around 30 per cent. 

Does that mean that you will be reducing your reliance on Kerala? 

We are not reducing reliance on Kerala. We are only wanting our fair share of business in markets outside of Kerala. Because those are much larger markets, over a point of time, Kerala's share may plateau. 

During the first quarter you posted a 46 per cent rise in net profit. What were the key drivers of growth?

We had a relatively satisfactory quarter. Our advance grew 11 per cent, deposits grew 8 per cent, and CASA grew 7 per cent year-on-year. Gross disbursements on a year-on-year basis has grown to 51 per cent and on a gross level income growth was 10 per cent. As a result, our operating profit and net profit has gone up by 46 per cent. 

During the quarter our retail products, which are home loan, auto, and gold started showing significant momentum. Agriculture loans on which we are going after, also grew nicely. I find that our corporate business continues to remain buoyant in the current environment. 

Slippages for the quarter was at ~341 crore, while recovery was approximately ~309 crore. By the end of this financial year, we want to bring our net NPA number by 10-20 basis points and bring it as close to 1 per cent by the end of this year. 

What is your growth outlook for the year?

We as an institution are not giving any forward guidance at this time. We want to reiterate the fact that we will continue to restructure our organisation to start getting as much productivity as we can and continue to rebalance the portfolio, which is biased towards corporates. 

We think that return on assets on orders that we achieved during the quarter is something that we will continue to do in the future, assuming that there is no change in the environment. We are in a period of consolidation now.