 "IDBI aims to double business in 3 years")
In about a month of being at the helm of IDBI Bank, K P Kharat, its new chief executive, has begun reorienting the public sector lender to grow business faster.
He wants to more than double the business in three years. As of end-March, deposits plus advances were Rs 468,213 crore; by the aspiration, this ought to reach Rs 10,00,000 crore by 2018. His three-year tenure as managing director and chief executive officer is to end in September 2018.
A senior bank official said a three-year business plan would be taken to the board of directors for approval by the end of this month.
The business growth rate has been 10 per cent annually in the past three financial years. Part of this might be for practical reasons -- high growth, especially in big corporate loans, come with the obligation of enhanced priority sector lending targets. With limited branch presence in semi-urban and rural areas, meeting these has been difficult. That, in turn, has forced it to deposit money in the low-yielding Rural Infrastructure Development Fund.
According to Reserve Bank of India data, overall bank credit grew 9.5 per cent in the year till mid-August, down from 10.4 per cent a year before.
While being in the slow growth lane for three years, IDBI has used the time in growing the share of retail, small and medium enterprises, and agriculture in loans. Analysts say bringing aggression into action is needed. At the same time, the bank will have to factor in resolution of and recovery from the current portfolio of stressed loans (non-performing loans plus standard restructured loans). The share of non-performing loans was 5.9 per cent in March 2015.
Global rating agency Fitch, in a report last month, said IDBI was vulnerable to a downgrade, with the deterioration in its stressed asset ratio to 13.6 per cent in FY15 from 11 per cent in FY14, and higher exposure to stressed sectors. The portfolio of restructured assets had doubled in three years from Rs 10,000 crore in March 2012 to Rs 20,936 crore in March 2015.
Bank executives said the new CEO had conducted a couple of 'town hall' meetings with employees and customers in Mumbai, Kolkata and Delhi, for discussing growth strategies and seeking feedback. Many such sessions are in the pipeline.
A falling bottom line has limited the internal generation of capital, crucial for meeting the stringent Basel-III norms and for business growth. Net profit has been declining for three years. It was Rs 2,032 crore in 2011-12 and Rs 873 crore in 2014-15.
With a fall in interest income, the net interest margin dipped to 1.9 per cent in 2014-15 from 2.17 per cent for 2013-14. Part-reversal of interest income for assets which became non-performing assets was another factor.
Along with pressure on margin and profitability, the capital adequacy ratio has slid from 14.58 per cent in 2011-12 to 11.76 per cent. The central government, its owner, had infused Rs 6,284 crore as equity capital from 2010-11 to 2012-13. In 2014-15, it got no capital from the government, having failed to meet the efficiency criterion.
Since then, the government has changed its mind and, last month, decided to give another Rs 2,229 crore as capital to IDBI.
