Mangalore–based Corporation Bank is targeting a business of Rs 2 lakh crore this year and hopes to grow by about 25% next year. Chairman and Managing Director Ramnath Pradeep says the year has been a challenging one with interest rates rising sharply and low-cost savings and current accounts not growing as anticipated, as a result of which the bank’s margins may be slightly impacted.
Pradeep talks to Shreya Roy about the innovative ways that the bank has adopted to tackles the problem of non performing assets. He also discusses the bank’s strategy of balancing global ambitions with financial inclusion.
How has 2010-11 been and how do you read the coming year?
We have a target of Rs 2 lakh crore, from which we are not very far behind. In the next two years we should grow our loan book by 25% and deposits by 20-22%. Next year the total business growth will be around 25%.
How have interest rates movement impacted the bank?
This year has been challenging particularly after September when interest rates started rising and our margins could get impacted. We were targeting a net interest margin of close to 3%, which may not be possible. But we will achieve around 2.5%, which is higher than last year’s margin. Liquidity is an issue, and we are not comfortable with the growth in deposits, particularly CASA.
Though we have increased the number of CASA accounts, maintaining the balance has been a challenge. Earlier, our average was at least Rs 25,000, which has come down. People are leaving smaller amounts in the savings account while the rest of the deposits are being converted into term deposits. We are now working on quality of deposits rather than on the quantity and this will be the focus.
The bank’s NPAs were up slightly in the December quarter...
We have been able to make a substantial recovery. We’re displaying photographs of willful defaulters on our websites and in our branches and this has shown results. We do not want to adopt coercive methods, but we have no sympathy for wilful defaulters. We are committed to helping people repay, but wilful defaulters will not be dealt with casually. There was a delay on part of the bank in taking such steps, but now, we find our efforts are bearing good results, and total reduction in NPA this year will be substantial.
What are your network expansion plans