Bank of Maharashtra is adopting the strategy of going for specialised branches for both retail loans and recovery of bad debts. The Pune-based lender has recently received Reserve Bank of India’s (RBI’s) approval for opening three dedicated retail asset branches and five for specialised recovery branches. In an interview, Allen C A Pereira, chairman and managing director tells Manojit Saha that while the thrust is on retail assets, overall loan growth for the bank was more than the industry for the first six months of the current financial year. Excerpts:
Credit growth was lowest in six years in the first six months of 2009-10? How did the bank’s loan book grew in the July -September quarter?
The bank has recorded a 16.5 per cent year-on-year credit growth till end of September. The outstanding credit was Rs 36,500 crore. Agriculture loans have grown by 18 per cent year-on-year in second quarter, education and SME loans loan growth is 30 per cent each, and infrastructure loans grew by 40 per cent. Sequentially loan growth, as on September over March, was 5 per cent. While treasury income growth was moderate, credit was the main growth driver in the second quarter.
How was the performance of the liabilities?
Our deposit growth was 28 per cent year-on-year as on September 30. Outstanding deposit base was Rs 53,000 crore as on end of September. The low cost deposits or the current account and savings account (Casa) is also growing well. Current account growth is not that much but savings account growth from April to now is about 12 per cent. Between last September and now, it is nearly 17-18 per cent growth. We are targeting Casa growth of 15 per cent in the current financial year.
What is your Casa proportion to total deposit now? Where do you see it by the end of March?
Casa proportion is now 36 per cent of total deposits. By the end of year, I think it will be remain around the same level.
Margins are under pressure for the banking sector. How have you fared?
Margins are under pressure because of high cost deposits raised in September last year and significant cut in lending rate over the last one year. Our margins are however, stable. Our net interest margin is around 1.75 per cent in Q2 as compared with 1.71 per cent in Q1. Our full year target for NIM is nearly 2 per cent.
Will you cut deposit rates further to improve margins?
I don’t see further trimming of deposit rates. I want to keep my deposit rates attractive.
The bank is trying to be aggressive in retail lending. How will you ensure asset quality?
We had consciously kept retail exposure low in the last two-three years, because of delinquencies. We found out proper due diligence was not there.
Now, we are launching Maha Bank Retail Credit Hub, an entity dedicated for retail loans. We have got RBI licenses immediately for three such centers. The plan is to have in all major cities such as Ahmedabad, Bangalore, Hyderabad, Kolkata, and Chandigarh. These hubs will process and disburse housing loan, vehicle loans, mortgage loans, educational loans and consumer finance.
This sector is profitable but at the same time risky. So a dedicated hub will give desired results.
How much is our retail portfolio? What kind of growth are you projecting?
My retail is around Rs 5,000 crore, of which housing loan is about Rs 3,200 crore. In this year, I have a modest target of growing our retail loans by 15-20 per cent. Credit growth in 2009-10 is expected to be 20 per cent.
What is the strategy to bring down bad loans?
We are going to open five branches dedicated only for recovery of bad debts. These branches will be located in Delhi, Mumbai, Nagpur, Aurangabad and Kolkata. I want to bring down the net NPA to less than a per cent by the end of 2009-10 which was 1.75 per cent as on March 31, 2009.
The bank has sought capital from the government. When do you expect the capital infusion to happen?
We are expecting it in January or February. It may be in two-three tranches. So, in the first tranche we may get Rs 500-800 crore. My total expectation is around Rs 1,500-1,800 crore. My capital adequacy ratio is more than 12 per cent with 6.05 per cent tier-I capital. Capital adequacy will improve because of good recovery and robust fee income growth. We would like to maintain CAR above 13 per cent.
Any plans for a public issue since the bank has huge headroom for diluting government stake which is at 76.77 per cent?
This is not the right time for a public issue by a bank. We will see our balance sheet after March and then take a call.
