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A higher provisioning bill will keep pressure on bottom line: Ashwani Kumar

Interview with Chairman & MD, Equity, Dena Bank

A higher provisioning bill will keep pressure on bottom line: Ashwani Kumar

Abhijit Lele
The economy is seemingly on the mend but pain from the slowdown is not behind us. Our bottom line and balance sheet would stay under pressure due to a higher provisioning bill for stressed loans, Ashwani Kumar, chairman and managing director, Dena Bank, tells Abhijit Lele. Edited excerpts:

There is talk about upturn in the economy. Is it reflecting in business expansion on the ground?

Overall, things are improving and sentiment is better. A lot of work is being done in roads and the infrastructure sector. The situation in manufacturing is also better. The government has taken steps to support economic growth, which over a period would show results.
 

People are asking for finance, though drawals are yet to happen. Clearly, demand has come up in roads. This will create demand from allied sectors, like cement.

Keeping in mind the third-quarter results, what is the sense you get for credit beyond the industrial sector?

Retail (individual) and small & medium enterprises are doing reasonably well. The credit to small-size units is expanding at 25 per cent, year-on-year. In the retail segment, the housing sector is a thrust area. Our bank had set a target for sanctioning loans to 5,000 accounts, we'd cleared 3,500 proposals by mid-December. In the balance period (the financial year closes end-March), we expect to reach close to the target.

Awareness about thrust areas among staffers is helping to make a significant contribution to performance. We are impressing on them to finance proposals within their powers, instead of sending these to the head office.

Challenges to banks are not so much from the thrust sectors you spoke about. They are from corporates, industry and sectors facing slowdown. How do you judge the situation?

With so much of turmoil, there is challenge on asset quality but cultural change is also happening. People have become conscious of their responsibility for taking loans for projects.

We do not see many project proposals coming up, except in roads and renewable energy. In roads beside refinance, fresh proposals are also coming.

Would balance sheets remain under the pressure in the third (Oct-Dec) quarter?

There is nominal growth in top line (income) for all. If that does not grow, it affects the bottom line (profit). With the ageing of non-performing loans at Dena, we will need to make more provisions. I think there will be tough times.

The US Fed raised the key policy rate in December. What does it mean for the financial market, especially in India, and what is the outlook?

People were expecting a lot of volatility in the market. But, that did not happen as it (rate hike) indicated the US economy is reviving. Coming to bond yields in Indian markets, people had built positions up to 7.78-8 per cent in 10-year government bonds. The yields later eased to 7.72 per cent. Now that the event is behind us, we are not in an apprehensive state.

Yields are still high, compared to September-end levels. Would the impact be negative?

There might not be a major impact on the treasury side, since yields had dipped to a low of 7.51-7.52 per cent and most of the time were trading in a range of 7.6-7.62 per cent. There would not be substantial gains, either. No major impact is seen in terms of loss, appreciation or deprecation.

Your bank has got a nod from the board to raise capital of Rs 2,500 crore through bonds (tier-I and tier-II). You also have permission to raise equity capital. When would you tap the market?

We will raise capital through tier-I bonds before March. We do not have much requirement in tier-II. How much we will raise would depend on credit growth.

Raising capital through equity would be a last choice, as the stock price for most public sector banks is at a discount. Immediately, we might not require common equity tier-I. Actual plans would depend on the major growth and asset quality situations.

With strong competition and very little to differentiate in products amongst banks, how do you make one stand out?

Dena Bank's brand figures among the top 10 public sector banks. This has given a big boost to the image. Earlier, we had low brand recognition but that has changed over time. Our signages are visible everywhere. More important, our people are in the field in a big way and that has helped to improve visibility. It is the employees who create a brand and not signage. Our employees are moving in the field to meet customers and that has increased the brand's recall value.

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First Published: Jan 05 2016 | 12:38 AM IST

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