Having just weathered a tough year, Chennai-based Indian Overseas Bank (IOB) is sparing no effort to get back on the growth path. In an interview with Sajan C Kumar, IOB CMD M Narendra shares his views on the bank’s performance and overall prospects of the economy.
How did the bank fare in FY14, considering the tough external conditions?
IOB’s gross NPAs rose to 5.27% in December 2013 against 4.13% in the year-ago period. We expect a possible decline in the NPA levels for Q4FY14. However, as fas as return on assets (ROA) are concerned, the major constraints are incremental NPAs and interest reversal on restructured advances. Our total provisions were very high at 85.15% of the total operating profit during FY13, which limited our ROA to 0.24% despite all-out efforts to cut NPAs.
What steps are you taking to contain NPAs?
The problem of NPAs is related to several internal and external factors. The internal factors include diversion of funds for expansion, diversification, promoting associate concerns, cost/time over-runs during project implementation, inefficient management, strained labour relations and technical problems, among others.
External factors include global recession, power shortage, natural calamities, and so on. The asset quality of PSBs, in general, is impaired due to significant exposure to troubled sectors like power, steel, aviation, real estate and telecom. It is our objective to keep NPAs as low as possible. For that, NPAs are monitored at all levels, including the top management of the bank and ministry of finance.
Are you satisfied with the current rate of growth? What are your network expansion plans?
In FY14, the bank opened 363 branches. The overall Casa percentage of all new branches is well above 40%. The bank has opened around 37 lakh Casa accounts through intensive campaigns held throughout the year. We can expect an increase in Casa deposits only over a period of time, say, 2-3 years.
Hence, our Casa rate is expected to increase uniformly. We plan to open 400 new branches covering more rural and semi urban areas this fiscal. Accordingly, new recruitment would be made to meet the requirements.
Will there be any capital-raising in FY15?
During FY14, we raised R1,200 crore from the government, which holds 73.80% in the bank, and R396.04 crore from LIC, which now holds a 14.77% stake. As fas ar medium-term notes (MTNs) are concerned, there are a host of regulatory