Post exit from PCA framework, IDBI Bank to focus on improving efficiency ratios, says MD

Having emerged from regulatory restrictions recently, IDBI Bank is now looking at growing business in a calibrated way with more focus on profitability and in improving efficiency ratios, its Managing Director and CEO Rakesh Sharma said.

On March 10, the Reserve Bank of India (RBI) removed the LIC-controlled bank from its prompt corrective action (PCA) framework, which was imposed in May 2017, after it had breached certain regulatory thresholds, including capital adequacy, asset quality and profitability.

"With restrictions imposed by RBI gone, we will like to go in a calibrated way and grow the business in a more profitable fashion so that my efficiency ratios improve. Our revenue, profitability and other ratios will certainly show improvement," Sharma told PTI in an interaction.

He said in the fiscal 2021-22, the bank will be targeting to improve net interest margin (NIM) to 3 per cent, return of assets (ROA) at above 0.60-0.70 and cost to income ratio to below 50 per cent.

In the nine months ended December 2020, its NIM stood at 2.79 per cent and cost to income at 54 per cent.

"The depositors will now be seeing the strength of the bank. The bad phase is over and the bank is sufficiently strong," he said.

Sharma said during the last four years, when the bank was under PCA, the focus was on retail and priority sector lending. Currently, the share of retail loans in the bank''s total advances is 60 per cent and that of corporate loans is 40 per cent.

"Going forward we will not be stopping corporate business. We will start doing corporate business and will continue to do retail business. It will be a retail-focussed bank," he said.

During FY22, the bank is expecting around 8-10 per cent growth in mid and large corporate loan segments, and 12 per cent growth in retail and priority sector loans, he said.

Besides loan against property (LAP), the bank now wants to develop personal loans and gold loans portfolio, where it has a small exposure at present, Sharma said.

The bank doesn't see much stress in its loan book going ahead due to the better asset quality.

"Due to Covid, we could see minor stress in accounts. But the type of assets that we have built up in our bank, I don't foresee any problem," Sharma said.

Overall slippages in fiscal 2020-21 and the next fiscal will be less than 2 per cent, he added.

In FY22, the bank is targeting a total recovery of Rs 3,500-4,000 crore.

Sharma said the bank is well capitalised and there is no immediate need for raising funds.

As of end-December 2020, the bank's total capital-to-risk weighted assets ratio (CRAR) stood at 14.77 per cent.