REALISING BENEFITS OF MERGER, REDUCED COSTS, SAYS INDIAN BANK MD & CEO PADMAJA CHUNDURU
INDIAN BANK HAD A STELLAR F.Y. 2021 ON ACCOUNT OF COST RATIONALISATION AND SAVINGS AFTER IT MERGED WITH ALLAHABAD BANK. THE BANK EXPECTS FURTHER BENEFIT FROM REDUCED COSTS IN F.Y. 2022 WHILE IT EXPANDS THE FOCUS ON SME, EXCERPTS OF AN INTERVIEW WITH MD & CEO PADMAJA CHUNDURU How do you view the bank’s performance in FY 2021? What has helped in the turnaround and profitability?
During FY 2021, which was the first financial year post amalgamation, the Bank registered steady growth in both business and earnings. Bank was able to improve its non-interest Income, reduce cost to income ratio, contain slippages and grew both its operating profit and net profit year-on-year.
The Bank has started realising synergy benefits post amalgamation and this is reflected in the results. More than 200 branches have been rationalised during the year as against our internal target of 100 branches.this is apart from rationalisation of 25 Zonal Offices, 12 Currency Chests, 3 Large Corporate Branches, 4 FGMOS, 5 Service Branches, 6 Staff Training Centers and 6 Stressed Asset Management branches. The full benefit of the rationalisation will be visible in the current financial year through fur ther reduction in Cost to Income ratio and other profitability parameters.
How has the merger with Allahabad Bank changed the business?
The merger has brought a huge transformation in the business mix both in terms of quantity as well as quality. The CASA ratio of Indian Bank on a standalone basis was 35% as on 31.03.20 and the same has improved to 42% as on 31.03.21. This has reduced the cost of funds.the mix of RAM sector to Total Advances stood at 60% for IB and 44% for E-ALB as on 31.03.20.The same has improved to 58% as on 31.03.21 for the amalgamated entity.
The Single borrower and Group borrower exposure increased by almost 50% in the amalgamated entity. This helps the Bank in taking additional exposure to good rated Corporates to whom the Bank could not lend earlier.
Bank was able to complete the CBS Integration between two Banks in one go using “Big Bang” approach. Merger of IT operations and integration of systems has led to rationalisation of DC/DR sites. This has resulted in economies of scale through vendor rationalisation, finer pricing on AMCS and improved operational efficiencies. Bank has made long term investments in strengthening IT infrastructure, IT Security and Network operations. These investments are being leveraged through various Digital Transformation initiatives and the benefits will be visible in the coming years through increased business, profitability and enhanced customer experience. Overall, it is a winwin situation for the amalgamated entity.
What are the sectors that contribute significantly to your business? How critical are the SMES as a segment for the bank?
RAM sector contributed 58% of Bank’s total advance as on 31.03.21, out of which the share of MSME is 32%. With MSME sector contributing to around 30% of GDP of the economy, they constitute an important target segment in our portfolio. Bank is lending to MSMES for various business purpose, start-ups, projects etc., Bank is also funding the SMES through cluster financing. Processing centres are established in all the Zones and this is helping us in improving the Turnaround time and asset quality and delivery time.
With the merger process successfully completed, vaccination drive going at a faster pace and economy poised for growth, Bank will leverage its Balance Sheet size and strong capital to improve the market share in the MSME segment.
What new schemes and products are being planned for a launch?
Specific products to address MSME sector have been launched:
IND Sanjeevini (GECLS 4.0) – Loan product for setting up of oxygen plant by existing Hospitals and Nursing Homes – Loan upto Rs. 2 crores with 100% credit guarantee by GOI.
INDSME Arogyam – Loan product for setting up of covid related healthcare infrastructure, logistic firms, manufacturing and importers of vaccine, pathology labs, purchase of ambulance, cryogenic trucks etc.
IND Spring Board – Start up financing – Initially started at Chennai and now Bank is planning to expand the product pan India basis
MSME Clusters – Already we have 34 clusters pan India; We have identified another 30 clusters and our field level functionaries are studying the scope for our product; once it is completed additional clusters will be approved.
Any other product depending upon the market requirement will be launched
What is being done to reach out to more SME entrepreneurs?
MSME Webinars – Being conducted with representatives from Industrial associations, MSMES to explain about the various products, services available for MSMES
MSME Prerana – Mentoring program for business enterprises – conducted vernacular languages to educate MSMES about basic accounting, maintenance of books of accounts, various schemes available for MSMES with Government / Banks etc. MSME outreach campaigns – One of such campaign was conducted on 28th June 2021 on the eve of International MSME Day – During the campaign, loans under various schemes like, GECLS, PMSVANIDHI, CGSSD etc. were sanctioned / disbursed – Handholding of MSMES in registering under Udyami Registration Portal, on-boarding in TREDS / GEM platforms – Sharing of success stories etc.
Give us an overview of some popular products for SMES.
Popular products of MSME are:
IND SME Secure - Working Capital and Term Loan product for MSMES.
IB Tradewell – an exclusive loan product for Traders.
IB Doctor Plus – loan product for Doctors for setting up of clinics / hospitals, purchase of medical equipments etc.
IB My Own Shop – Loan product for MSME to purchase / construct shop / factory.
IB Pure Jaldhara – Loan product for setting of RO Kiosks by Micro & Small Enterprises.
IB Contractors - Exclusive loan product for contractors.
IND Surya Shakti – Loan product for setting up of Solar Power plant for captive use by MSMES.
IND SME Ease - Loan to MSMES where assessment is based on Turnover reported in GSTN site by MSMES and without insisting for financials / projections .
IND-SME e-vaahan - Loan to MSMES for purchase of electric vehicles for business purpose.
IND MSME Vehicle – Loan product for purchase of LMV / HMV by MSMES for business purpose.