Tamil Nadu-based Karur Vysya Bank (KVB) has set itself a target of 0.40 per cent market share and Rs 50,000 crore total business by March 2012. In an interview with T E Narasimhan, P T KUPPUSWAMY, managing director and chief executive officer of the 93-year-old private sector bank, talks about KVB’s growth and future plans. Excerpts:
A recent study stated that old Indian private sector banks (PSBs) are fast losing their market share to new rivals and facing a slowdown in business growth. Do you agree?
Each bank has its own market share, which may move up or down depending on the prevailing market conditions. Given the size of the market, new generation banks could be making inroads into the share of other banks. But they are looking only at the higher end of clientele.
At KVB, we have created our own niche among customers and our presence in Tier-I and II centres has helped us to a great extent. Besides, we have a strong market in Tamil Nadu and Andhra Pradesh. In fact, our foray into northern and western India has also met with success and we find that we have been able to make our presence felt in these centres.
In 2008–09, KVB’s deposits grew by 20 per cent and advances by 10 per cent. Total business crossed the Rs 25,000-crore mark. The bank’s market share continues to be around 0.39 per cent despite the presence of aggressive new banks. And, in fact, we are looking to improve this to more than 0.40 per cent in the near future.
A few old generation private banks focus on certain communities. Can they sustain with such a strategy, especially in today’s context?
Old generation PSBs might have been started by certain communities. But over a period of time, they have evolved into national institutions. For example, KVB is now spread over 13 states and three Union Territories. The bank is serving businessmen, industrialists and entrepreneurs across the country and does not see the community of any customers. The question is completely out of context in today’s environment.
KVB’s net profit in the first quarter increased two-fold and you have attributed the growth to increase in net interest margin (NIM), which rose to 2.80 per cent from 2.42 per cent, and non-interest income, which jumped to Rs 80.47 crore from Rs 39.25 crore. What would be the drivers going forward?
Our NIM rose riding on higher interest income due to the upward swing in rates on advances. Income from treasury operations supported the growth in net interest income (NII). Considering the fall in interest rates on advances following directives from the Reserve Bank of India (RBI) and the government, the NIM may not register a significant growth in the remaining fiscal. But with the share market showing signs of buoyancy, we are likely to reap the benefits of profitable trading in securities.
With regard to increase in the NII from operations, the bank expects support from the revenue generated out of the fee business and para-banking activities.
What was the effect of the slowdown on banks like KVB?
The bank has not felt any adverse effect since it has spread the risks across a wider basket of portfolios. The bank’s advances portfolio covers retail, corporate, small business, infrastructure, real estate, SME, export and agriculture sectors and hence, the setback in one sector has been offset by good results of another.
Most of the banks have said that credit portfolio dipped during the recession. What is KVB’s experience?
As we have a diversified advances portfolio, our bank is having a steady inflow of proposals from all segments. The year-on-year growth on advances has been 11.99 per cent. The CD ratio stands at 72.59 per cent. Overall, the bank’s growth has been in line with our projected targets for the year.
What is KVB’s business target for FY10?
For the current fiscal, it is Rs 32,200 crore and by March 2012, Rs 50,000 crore total business.
Do you have any expansion plans to support your business target?
We are targeting to take our branch network to 350 by the end of the current fiscal, and the focus will be on reaching under-banked areas and more centres in the north and the west.
Recently, KVB dropped it’s plan for raising money through a QIP issue. Any plans to raise fresh capital through some other route?
Raising capital through QIP has been put on hold on account of poor market conditions. It is too early to reveal other options and any decision on fund-raising will be taken in due course of time.
How do you foresee 2009-10 for the industry?
Bad days are over. And the signs of revival in the economy will definitely be reflected in the growth of the banking industry. This has already been reflected in the Q1 results of several banks.
Any comment on interest rate?
Interest rates are likely to remain low at least up to December as the government is serious about pushing credit in a bid to help the economy move up. But with indications that inflation is likely to be felt on account of the heavy borrowing programme of the government, interest rates may climb up.
