Private sector lender DCB Bank is aiming to double its loan and deposit book over the next 3-3.5 years, MD and CEO Praveen Kutty told businessline. He says the bank, which will continue to focus on growing secured loans, aims to lower cost of deposit and expects slippages to remain stable, going ahead.
How is business growth panning out so far in Q4 and your business guidance for the next fiscal?
As a bank, we are focused on the self-employed segment. Majority of our deposits and loans come from this segment of customers. We are present practically across India, except the North-East. There is not a single State where we have over 20 per cent of the assets, so it is a well-diversified geographical portfolio. We have multiple products for the self-employed segment including home loans, business loans and working capital loans for small and medium enterprises. Practically all loans, except for corporate loans, are curated for the self-employed segments. While some are agriculture-based self-employed, some are SME manufacturers, retailers, wholesalers, self-employed professionals like plumbers, welders, bakers etc.
We also ensure that our loan book is, for the most part, secured and pre-dominantly we have the collateral security of residential or commercial property, and we also have a sizeable gold loan-book which ,of course, is also secured. The ticket size is also low, our ₹3-crore-plus loans form only 14 per cent of advances. We see growth continuing, coming in from mortgages, gold prices are climbing and there is increased demand for gold loan.
There is some bit of work that needs to be done on overdraft accounts for the SME segment. The micro-finance loans are lower than last year because of the recent headwinds. KCC, tractor book will continue growing in a similar range, but core mix will largely remain in favour of secured small-ticket business loans. We have grown 19 per cent in assets and 20 per cent on liabilities; we intend to double our book in 3-3.5 years.
What are you doing to improve CASA ratio?
Our CASA ratio stands at upwards of 22 per cent. We are concentrating on lowering our cost of deposits and to this end CASA plays an important role. Our savings account rates are as low as 1.5 per cent, on the one hand, and also as high as high as 6.9 per cent on the other.
High-cost savings account deposits is frankly the money which is coming for investments, which would otherwise have gone to bulk deposit. It improves the CASA ratio, but not the cost of deposit. So, our focus is to get customers to use the savings account — to chase the flow and sooner than later, the float will materialise. Earlier, CASA ratio was really important because 4 per cent was the maximum return on savings accounts, but now because of the freedom to price them differently, it has become expensive. So CASA ratio, in isolation, may not show the right picture, but the trend line of cost of deposit matters. But still, CASA remains a cheaper source of funds than term-bulk deposits.
Right now, we have streamlined term deposit rates lower, and we have grown deposits by 19.5 per cent, reduced cost of deposits by 10 bps to 6.86 per cent and kept the granularity of the deposit franchise. Our top 10 depositors now account for 6.61 per cent of overall deposits, lower than past.
Do you have scope to cut deposit rate further?
We constantly compare the peak retail term deposit rate of our bank with top three private and top three public sector banks and we are seeing a convergence happening. The gap between us and them used to be 89 bps in March, now it has come down to 60-65 bps. The endeavour is to close this gap even further in the near future.
Your guidance on credit cost..
Our goal is to maintain credit cost in the 45-55 bps range. What we are seeing is that slippages have come down to a three-year low, GNPA and NNPA are at three-year plus low and upgrades as a percentage of fresh slippages have risen to 86 per cent. Post-Covid, we have not seen such level of upgrades. What happens in the self-employed market is that there could be delays, but what is also very true is the resilience of customer base, which ensures that loss rates are low.
How do you see NIM moving ahead?
The full impact of 25-bps repo cut has not been fully baked in during Q3, some of it will come in Q4. But I think NIM will continue to improve, going ahead.
