With a GDP growth of 6.5%, we will be growing at 13%: South Indian Bank CEO

The road map is clear that we want to grow in retail, as it helps us in diversifying the business, says Ramakrishnan, MD & CEO, South Indian Bank.

The tenure of Murali Ramakrishnan as managing director (MD) and chief executive officer (CEO) of South Indian Bank is set to be over by September 2023. During the first quarter of 2023, the bank posted a 75 per cent rise in net profit. Ramakrishnan lines up the reasons for the good show and the future outlook for the bank, in a telephonic interview with Shine Jacob. Edited excerpts:

When you took charge, you said your focus is on retail and small-and-medium enterprises (SMEs). Still, the majority of your loan book or around 37 per cent is coming from corporate. What is your strategy, going ahead?

The roadmap is clear and we want to grow in retail, as it helps us in diversifying business. We will continue to tap corporate as we find good quality clients and are able to penetrate into the segment. Every quarter, we do an analysis of various industries and we do the outlook for those industries. Depending on whether the outlook is positive, stable or negative, we are choosing the corporate segment in a calculated way. Maybe, aviation is one of the sectors we will not touch. If the outlook is stable or positive, we have no issue in looking at them. We have also come out with new products in the SME business, with which we are growing the business in a gradual way. We know that the segment is risky, and hence, very carefully maneuvering it. On April 1, we did a restructuring of our entire portfolio. Some of our customers, who were earlier shown as SMEs and had large exposures, were shifted to corporate through realignment of our portfolio. Through this realignment, around Rs 3,000 crore from the SME book was moved to corporate.

Considering the economic situation now, what is your guidance for the current financial year?

For the last one year, the rate situation has continuously gone up by 2-2.5 per cent, because the central bank has increased repo rates. We expect the increase in rates to happen once or twice in the coming two quarters. Around 25 basis points (bps) change probably can happen. We hope that the liquidity situation will be a little constraint because your asset growth is outdating liability growth. So, there will be pressure on mopping up deposits. With interest rates going up, we may have to re-price liabilities and assets suitably. So for the overall financial year, we are having a guidance of 13 per cent growth on assets. And, we want to maintain our credit-deposit ratio between 75 and 77 per cent for the financial year. We are looking at double the GDP growth. With a GDP growth of 6.5 per cent, we hope to grow at around 13 per cent.

What were the major drivers of your growth during the first quarter?

We are growing with quality as a focus across all product segments. We are seeing good traction and are able to attract high-quality customers to our fold. In retail, our credit card and personal loan book are growing. On the asset side, we have seen a 15 per cent growth, in tune with the guidance we had given of 13 per cent. Advances have grown from Rs 64,704 crore in June 2022 to Rs 74,102 crore in Q1 this year. So far as liabilities are concerned, there has been a liquidity situation in the market, where liabilities are getting re-priced. And also, market opportunity is available for any investor to switch over to equity or mutual funds, because the capital market is doing so well. People also do not want to keep their money in a current account or savings account. To that extent, we find that deposits have to be re-priced in order to retain the customers. So, we have been very carefully increasing our liability pricing. We are seeing a good growth in our liabilities of around 8 per cent. Retail also has grown by 6 per cent. Recovery has been a very good story for us. Last year, we did about Rs 1,800 crore of upgrades and recovery. This year also, we are targeting Rs 1,800 crore.

Your average overall ticket size has decreased from Rs 17 lakh when you took charge to less than Rs 14 lakh as of June 2023. Can you throw light on that?

This is because of the number of customers we are adding in retail like personal loans and credit cards. In terms of the number of retail customers, that book was almost negligible when I took charge. That has touched close to Rs 3,000 crore today. Also on the gold loan book, we are consistently growing. Gold is around 20 per cent of our overall personal loan book.

In corporate also, some of our customers are having short-term loans. So, rather than looking at overall ticket size, one should look at segment-wise ticket size. Gold loan portfolio during last year Q1 was Rs 11,961 crore, including agri gold loan of Rs 9,064 crore. This has gone up to Rs 14,478 crore during the Q1 of 2023, with agri share at Rs 11,282 crore. It has seen a year-on-year growth of 21 per cent.

You joined the bank amid Covid and then it had two serious issues – low capital adequacy and low provision coverage ratio. How far were you successful in both these parameters?

We raised a capital of Rs 240 crore in March 2021. Other than that, our capital adequacy is showing an increase because the portfolio that we are building from the new book is of impeccable quality. I have added Rs 46,000 crore since October 2020. As you keep churning the legacy bad quality book with a good quality book, your risk density will be coming down. That is why our capital adequacy reached 17.25 per cent by the end of the last financial year. Provision coverage ratio (PCR) was at a scary situation for the bank when I took charge. PCR, excluding write offs, went down to as low as 32 per cent. We made a conscious effort of allocating more towards provisions whenever we had a recovery happening. We have done a very good job in recovery. We recovered around Rs 1,800 crore last year, compared to a very low number of around Rs 600 crore in previous years. Wherever we get a bumper recovery, we continuously provide more towards excess provisioning.