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Public sector lender Andhra Bank is looking to cut its base lending rate by March 2015 as tepid credit demand has weighed on banks that are flush with liquidity.
Andhra Bank had recently curtailed its deposit rate by 25 basis points (or 0.25 per cent). The bank had last revised its base rate from 10 per cent to 10.25 per cent on August 19, 2013.
“We have already announced a cut in our deposit rate by 25 basis points. Ideally, a revision in base rate should follow in eight months. But we don’t think we can wait that longer. We may possibly announce a cut in base rate by March 2015. In any case, our base rate is amongst the lowest in the industry and today, only three banks have a base rate lower than Andhra Bank,” CVR Rajendran, chairman and managing director (CMD), Andhra Bank told reporters here.
“Low credit demand in the country is a problem and we cannot expect any immediate revival in demand. Both the deposit and advance rates have to be brought down further to stimulate demand,” he said.
The PSU bank is aiming to contain its gross NPA (non-performing assets) to five per cent of total advances by March 2015.
“Our gross NPA is quite high at 5.9 per cent. Ideally, I would like to bring the gross NPA down to four per cent and net NPA to two per cent (from 3.86 per cent currently). But our aim is to contain gross NPA at the level of five per cent by March next year,” Rajendran said.
He said, Andhra Bank had an exposure of Rs 4,600 crore to companies that lost coal blocks after the Supreme Court order, hinting that many such loans had the possibility of getting converted into bad loans.
On account of high NPAs, the bank has to go for higher provisioning by the end of 2014-15, said the CMD but refused to disclose the amount.
The bank has an exposure of Rs 11,000 crore in the power sector including Rs 1,000 crore for power projects being implemented in Odisha.
Eleven per cent of our advances are to the power sector while the steel sector has a share of eight per cent, Rajendran said.
Andhra Bank has planned to raise Rs 1,000 crore through long-term infrastructure bonds to fund projects with long gestation periods. The bank CMD said there was possibility of raising another Rs 1,000 crore in 2015-16.
The bank has achieved a total pan-India business of Rs 2.6 lakh crore (as on September 30, 2014), logging 13 per cent year-on-year growth. It is eyeing Rs 2.75 lakh crore business by the close of this fiscal.
