Indian bank targets 8-10% credit growth in FY23, says CEO Sl Jain

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Mumbai: Public sector lender Indian Bank plans to increase its loan portfolio by 8-10% in the 2022-23 financial year due to rising demand for personal and business loans, it said on Thursday Managing Director SL Jain.

The bank’s lending to individuals, agriculture, and micro, small, and medium enterprises (MSMEs) together grew 11% on an annual basis in the fourth quarter of FY22. On a consolidated basis, these three segments are called sector RAM by banks. Its business loan portfolio contracted by 5% over the same period, bringing the share of RAM loans to 61.3% of total advances.

“We have increased our RAM portfolio to 11% and we would like to maintain this rate. In these loans, the margins are healthy and the risk is spread. We would continue to have this kind of mix between RAM and enterprise loans of around 60:40,” Jain said. mint by telephone.

While the bank is targeting loan growth of 8-10%, it could be even higher depending on demand for business loans in the face of rising commodity prices.

“Our working capital utilization levels are improving thanks to higher raw material prices. Suppose utilization levels were at 70% before, they are now at 75-80% and that automatically increases growth of our credit,” Jain said.

Asked about Indian Bank’s shrinking business loan portfolio, Jain said the lender was unwilling to sacrifice margins for growth. The abundance of liquidity due to the central bank’s easy money policy has led to extremely thin spreads on corporate loans, several bankers have said in the past.

“Due to excess liquidity, pricing in the corporate segment is very good. When such pricing doesn’t work for us, we don’t go ahead, but rather put our money where we can earn better margins,” he said.

In FY22, the bank recorded a 6 basis point (bps) increase in net interest margin, a key indicator of profitability, to 2.91%. Jain said that since it will take time to increase deposit rates, higher lending rates should improve margins in FY23.

“That aside, the increase in the number of businesses and the level of business loan utilization would be good for margins,” he said.

Jain said the bank would see an impact of approximately 3,000 crore from the recent 50 basis point cash reserve ratio (CRR) hike, but does not see this having a dramatic impact on the lender.

In the fourth quarter, Jain said a chain of stores that is currently making headlines moved to the underperforming category, without specifically naming the Future Group. Total corporate slippages in the March quarter amounted to 973 crore and Jain said much of it was due to the retail chain. Indian Bank also experienced slippages 1,431 crore from the small business segment.

“In MSMEs, although we have provided government guaranteed loans and protected most of them, weak demand and rising commodity prices are impacting these businesses. We provide them with adequate liquidity and wherever the unit is viable, we also increase their limits,” Jain said.

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