Indian Bank Sheds Rs 1,500-Cr Costly Deposits

Chennai: Indian Bank has not renewed around Rs 1,500 crore of high cost deposits that matured after September. The bank was paying between 8.5 per cent and 9 per cent on these deposits.

M.S. Sundararajan, Chairman and Managing Director, Indian Bank, says the bank can afford to say ‘no’ to deposits without hurting its ability to lend.

Recently, the Government allowed re-capitalisation bonds to be classified as bonds that are eligible for SLR status. Thus, about Rs 4,700 crore of Government-gifted bonds became tradable in the market.

Investments

With this, Indian Bank’s SLR investments work out to about 34 per cent of deposits, against the mandatory 25 per cent. It can raise resources cheaper by selling its investments than by accepting high-interest deposits.

Sundararajan says that even the no-cost current account and savings account deposits and the low-cost short-term deposits are increasing at a pace that would take the bank’s total deposits up by 20 per cent at the end of the year over last year. Credit growth is slower, at around 17 per cent. That, Sundararajan says, is a concern.

“We have around Rs 4,000 crore of advances in the pipeline - sanctioned but not disbursed,” he told Business Line. The bank is trying to expedite disbursements. Today, the demand is more for term loans and less for working capital. Term loans typically take time to be drawn.

Micro credit picking up

At the other end of the spectrum, micro-credit is picking up. Indian Bank, according to its Chairman, realises that there is plenty of scope to lend to the urban poor. It has opened seven branches in the current year - at Patna, Vijayawada, Hyderabad, Nadiad, Kollam, Kolkata and (a second one in) Chennai. Today, there are 11 ‘micro sat’ Indian Bank branches, that do only micro-lending.

The last was opened recently at Thiruvanmiyur in Chennai. “On the very day of opening, we disbursed Rs 10 crore to a self-help group,” Sundararajan told Business Line.

The bank aims that each of the 11 branches should disburse Rs 25 crore before the end of this year. Currently, the bank’s micro-credit portfolio is Rs 700 crore and the bank is confident of building the book to Rs 1,000 crore.

“It is worth doing this business. Margins are very good and recovery is 99 per cent,” Sundararajan said.