Tamilnad Mercantile Bank (TMB) is aiming to maintain below 2% gross non-performing asset ratio (GNPA) and sub-1% net NPA ratio during the current financial year, its MD & CEO S Krishnan told FE in an interaction. As on March 31, the bank’s GNPA ratio was 1.39%, lower than 1.69% a year ago, while the net NPA ratio was 0.62% as against 0.95% in the previous fiscal.
“If we look at asset quality it is one of the best with gross NPA of 1.39% and net NPA of just 0.62%, slippage ratio of 0.82% and credit cost of 0.4%…Gross NPAs will continue to be less than 2% and net NPA less than 1%. Coming to the credit cost, it should be ranging between 0.5%-0.75%, and slippage ratio will be less than 1%,” he. The Thoothukudi-headquartered private lender on Monday reported an 11% year-on-year rise in its net profit for the quarter ended March at Rs 253 crore.
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Krishnan, who was appointed as the bank’s new MD in September last year, is aiming to grow TMB’s presence as a pan-India and digital focused bank. The bank opened 21 branches in FY23 and will open another 50 branches in different parts of country this fiscal, where the potential for banking business is higher. Presently, the bank has around 530 branches of which about 370 branches are based in Tamil Nadu itself.
“I may be opening a few branches in Tamil Nadu also, and I will go in other states as well…In FY23, we opened in Guwahati, probably the first branch in North-East and we have opened in Morbi in Gujarat, so we will be expanding where the potential is available,” Krishnan said.
“My vision is how to make this bank a pan-India one and how I can make this bank as most preferred digital bank. If we are able to do these two, probably it would be the best because the bank has its own strength. As far as bottomline is concerned, it is well positioned, we are making profits and FY23 we made the highest profit ever,” he added.
TMB’s loan book grew 11% y-o-y to Rs 37,582 crore as on March 31. Retail, agriculture and micro, small and medium enterprises (MSME) loans accounted for 87% of the bank’s total advances. The MD said the bank will grow its advances by 10%-12% in the current fiscal and continue its focus on growing the Rs 13,319 crore MSME loan book. Towards that end, the lender has already undertaken a business process re-engineering exercise, wherein it is identifying how existing MSME loan products can be further fine-tuned.
“As phase one, I am focusing on MSME, what are the products that I have today for MSME, how can I further fine-tune it, what are the new products that I can bring in and how I can make it more digitalised for the MSME space so there is ease of banking for customer. That project has taken off modestly, it will be completed within 9-12 months and I hope that will bring the bank new business in FY24. Besides that, we are also embarking upon various digital transformation, having tie-ups with fintechs and these are all in various stages of discussion,” Krishnan said.
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On liabilities front, the MD said most banks’ low-cost current account and savings account (CASA) deposits have come down by about 200 basis points (bps) during FY23 on account of tight liquidity conditions and with Reserve Bank of India (RBI) squeezing excess liquidity out of the banking system.
“I had not increased cost of deposits for longer time while my peers were increasing for simple reason that I want an optimum CD (credit-deposit) ratio. The CD ratio was going up, and then I increased deposit rate in Q4 where I could garner good amount of deposit. So, I believe that CD ratio of something around 76%-80% should be very optimum and we will be working towards that…,” the MD said.
The private bank’s total deposits grew 6% y-o-y and 10% on a sequential basis to Rs 47,766 crore as on March end, while CD ratio stood was at 79%. The bank’s CASA ratio fell to 29% in January-March from 30% in Q3FY23 and 31% in Q4FY22. In FY24, the bank is targeting for a deposit growth of around 8%-10%, the MD said.