See 5% hit to LCR from RBI's draft norms, says Indian Bank MD
This story was originally published at 14:45 IST on 30 July 2024
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NEW DELHI – Indian Bank expects a hit of 5% to its liquidity coverage ratio from the Reserve Bank of India's proposed norms on management of liquidity coverage ratio, the lender's Managing Director and Chief Executive Officer Shanti Lal Jain said today. The bank's current liquidity coverage ratio is 120%.
The RBI has proposed that banks assign an additional 5% run-off factor on retail deposits opened by customers who have internet and mobile banking facilities enabled, and tighten other norms on valuation of high-quality liquid assets, as well as bring other sources of banks' liabilities under the liquidity coverage ratio framework.
"We will continue to focus on digital, because today the customer wants immediate debit cards, credit cards, mobile banking and internet banking," Jain said at a post-earnings press conference. While the proposed norms could hit the liquidity coverage ratio by up to 5%, the bank's core interest remains increasing the customer base and deposit base, and growing the business, he said. "So, we'll continue to focus on that."
The Chennai-based bank on Monday reported a 40.7% on-year jump in its net profit for the quarter ended June at 24.03 bln rupees because of a fall in non-tax provisions and contingencies. The bank's total global business increased 11% on year to 12.20 trln rupees as of Jun 30. Total deposits were up 10% on year at 6.81 trln rupees, while total advances rose 12% on year to 5.39 trln rupees as of Jun 30.
"All our engines are firing," Jain said. "Our business is growing and at the same time, our profitability is growing."
The bank's asset quality has also improved in recent times, with the gross non-performing asset ratio coming down to 3.77% as of Jun 30 from 5.47% a year ago and 3.95% a quarter ago. The net non-performing asset ratio moderated to 0.39% as of Jun 30 from 0.70% a year ago and 0.43% a quarter ago.
However, the gap between slippages and recoveries narrowed in Apr-Jun, mainly because fresh slippages rose due to stress from seasonal factors and the General Election. Fresh slippages rose to 19.28 bln rupees in Apr-Jun from 17.53 bln rupees a year ago, while recoveries fell to 19.37 bln rupees from 20.08 bln rupees in Apr-Jun last year.
Jain said the bank wants to bring down the slippage ratio from 1.50% in Apr-Jun, and he expects total recoveries of around 70 bln rupees in the current financial year started April.
Jain said that while deposit growth remains a challenge, the bigger test is raising low-cost deposits. The bank is also trying to pass on a part of the cost of higher deposits by raising the marginal cost of funds-based lending rate.
The bank has set up around 100 resource acquisition centres which will target high net worth individuals and institutions, Jain said. The bank has also tied up with 135 financial technology companies for mobilising deposits. The lender also plans to open 100 branches this financial year, Jain said.
To grow business, the bank will be aggressive in co-lending to the micro, small and medium enterprises sector, and will also look to increase partnerships, Jain said.
At 1329 IST, shares of the bank were up 0.6% at 590.55 rupees on the National Stock Exchange. End
Reported by Shubham Rana
Edited by Avishek Dutta
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