Pune-based Bank of Maharashtra has prepared a road map to achieve its agricultural lending target over the next three years, after missing it in the last three years. In an interview with Parnika Sokhi and Manojit Saha, Chairman and Managing Director A S Bhattacharya says the bank aims to maintain the current level of low-cost deposit share to help keep its margins steady. Edited excerpts:
The bank has missed its agricultural lending target for the last three years. How do you plan to beef up farm lending?
It is unfortunate that despite being a rural-focused bank, Bank of Maharashtra was not able to meet the farm loan disbursement target, which is 18 per cent of the adjusted net bank credit. In the last financial year, it stood at 13 per cent. Now, we propose to meet our agricultural target in a phased manner. By 2014, we would be able to meet the 18 per cent target. In order to beef up disbursements, we have started opening branches that are exclusively focused on agricultural loans. At least one such branch would be opened in all the six districts of the state.
The bank's low-cost deposit share is quite healthy. More than 40 per cent of your deposits are current account and savings account (Casa) deposits. Do you think the bank would be able to sustain the high Casa share at a time when term deposits are offering attractive returns?
Most of the branches are in rural and semi urban areas. In such areas, a healthy level of Casa could be maintained, provided the bank offers good services to its customers. We have seen improvements in Casa over the last five quarters. As on March 31 2010, Casa was 36.9 per cent, while as on June end it is 40.61 per cent, though it is slightly lower than 40.44 per cent recorded at the end of the Jan-March quarter. Going ahead, we aim to maintain Casa above 40 per cent.
The high share of Casa also helped the margins.
Yes, the net interest margin has shown an improvement. It rose from 2.05 per cent in 2009-10 to 2.80 per cent in 2010-11, with the net interest margin in the fourth quarter at 3.13 per cent. Apart from healthy low-cost deposits, shedding on high-cost bulk deposits in the last one year also helped improve the margin. As on March 31, 2010, we had high-cost deposits worth Rs 16,000 crore, which has now been reduced to Rs 10,000 crore. By December, we want to reduce it to Rs 3,000 crore and by March next year, we would shed all high-cost deposits.
So, where do you see your margins in the current financial year?
It would be around three per cent for 2011-12.
Has credit growth picked up in the current financial year?
The first few months of a financial year are known as a slack season. Credit growth is yet to pick up. We have a sanction of Rs 6,000 crore in the pipeline. We hope the situation would improve from the August-September period.
Most banks are experiencing pressure on their asset quality. What are the steps the bank has adopted to keep non-performing assets (NPAs) under check?
Since 64 per cent of our NPAs are of less than Rs 10 lakh and 54 per cent are of less than Rs 5 lakh, we have created exclusive cells to improve monitoring. In the last one year, 13 micro asset recovery cells were set up and another five would be opened this year. As a result, our gross NPAs have come down to Rs 1174 crore as on March 31 from Rs 1468 crore a year ago. Though we are yet to finalise our balance sheet for the first quarter, we hope the June-end figures would not be more than the March figures.
