We are focusing on organic growth: Abraham Thariyan

Interview with executive director, South Indian Bank

In a move to support its business growth plans, Thrissur-based South Indian Bank has raised Rs 442 crore through qualified institutional placement (QIP). It also plans to ramp up its presence in North India by opening more branches. Abraham Thariyan, executive director, South Indian Bank speaks to Abhishek Vasudev on the bank’s future plans amid stiff competition. Edited excerpts:

You recently completed a qualified institutional placement (QIP) and plan to increase visibility in North India. What is your current status of branch network and by how many branches does the bank plan to grow?

We have made a five-year plan as early as 2008 when the total business of the bank was around Rs 25,000 crore to reach a total business figure of Rs 75,000 crore and total number of branches and ATMs to 750 by 2013. As on 30 June 2012, we have crossed total business of Rs 65,000 crore and have already reached 750 ATMs. The number of branches are 730, out of which 140 branches are in six major metros.

What is your business strategy? Can you elaborate more on your expansion plans?

Our 60 per cent of total business is outside Kerala. In terms of revenue mix, 25 per cent of all revenue comes from north India. We have been expanding at a healthy rate and expect to do good business in Delhi and the NCR region. In total, we have already done business of more than Rs 65,000 crore this year so far upto 30 June 2012.

We have raised capital of Rs 442 crore via QIP, and by the next two three years, we will be able to infuse fresh capital. Even in tough market condition, we have successfully raised money. We are confident of maintaining healthy capital adequacy ratio going ahead.

So, how much does it cost to set up a branch?

In the urban setup, as per our experience, a branch becomes viable in two years. We are creating a lot of money through our acquiring business of ATM network. We plan to do business of Rs 1-lakh crore by 2014-end.

Your net non-performing assets (NPA) increased from Rs 60 crore to 75.6 crore in the last financial year (year-on-year basis). Is this a concern and how do you plan to tackle this problem?

We are a bank having one of the lowest NPAs in the banking Industry. However, the biggest challenge is to maintain low NPAs.

What are the key challenges facing the Indian banking sector?

There is stagnation of growth and that is affecting profitability of each sector of industry. Borrowers are finding it difficult to pay back their obligation and the credit expansion has slowed. Industrial growth and good asset quality credit growth is the biggest challenge facing the Indian banking industry. Inflation and higher interest rates had also dampened the sentiment. Now, newly announced economic reforms have picked up sentiments and more investment in infrastructure will come in. This will help revive the investment climate.

What is your view on the Reserve Bank of India's (RBI) current policy stance?

The RBI's stance on the monetary policy was absolutely justified. Growth is not the only concern which one should worry about. Inflation, too, is a concern and the central bank did the right job. Certain things are out of the purview of the RBI. Supply-side constraints and food inflation are a few things which the central bank cannot do much about.

Weak rupee was also a major concern and that also curbed the RBIs power to reduce the interest rates. Given the recent policy and reform measures, the central bank may ease key rates going ahead.

Do you have any acquisition plans?

We do not have any acquisition plans as of now. We are focusing on organic growth.