Indian Overseas Bank is a step ahead of its plans for financial inclusion and out of 1,273 villages, IOB has already covered 786 villages against the target of 750. The bank is also on a mission to expedite the 100% inclusion of the remaining villages by December 2011 against the original plan of March 2012. Its chairman and managing director M Narendra spoke to Himani Chandna Gurtoo on a range of issues. Excerpts:
What are your expectations from the budget?
We expect to get some instruments to raise long-term funds. The Indian Overseas Bank (IOB) is getting a bundle of requests for infrastructure loans, whereas our resources are short term. The Indian Banking Association has already raised the issue in an informal discussion. The customer should get more incentives and greater relaxation to raise tax-free bonds, to invest in long-term projects. Moreover, banks will also have long-term funds.
What is the interest rate scenario?
Until the inflation comes to the original level of 5% as against the projected 7%, normalcy cannot be achieved. The whole idea is to correct the liquidity gap by way of more mop-up of savings in order to ensure that money in circulation comes to the banking fold. Interest rates and the liquidity scenario will become moderate if the government will channelise the savings to the productive sectors.
How was the deposit and credit growth last year?
Our deposit growth was over 19.6% last year and we would like to take it forward to 22% this year. Also, the current account, savings account (CASA) is growing around 20% on an average but in the aggregate term it is falling, primarily due to the sudden increase in float funds by the government. Our deposit rates are attractive and somehow, unique, too. On the other hand, our credit growth rate is around 27% (domestic) and 31% (globally), which is much higher than the projected growth rate. We propose to maintain the same momentum. Growth of credit is not a problem at all, as there is a promising demand from the agriculture, small and medium enterprises, retail, hotels and education sectors. Moreover, working capital requirements have also gone up.
How was the deposit and credit growth last year?
Our deposit growth was over 19.6% last year and we would like to take it forward to 22% this year. Also, the current account, savings account (CASA) is growing around 20% on an average but in the aggregate term it is falling, primarily due to the sudden increase in float funds by the government. Our deposit rates are attractive and somehow, unique, too. On the other hand, our credit growth rate is around 27% (domestic) and 31% (globally), which is much higher than the projected growth rate. We propose to maintain the same momentum. Growth of credit is not a problem at all, as there is a promising demand from the agriculture, small and medium enterprises, retail, hotels and education sectors. Moreover, working capital requirements have also gone up.
How are agriculture loans performing?
Our agriculture loans have crossed 19.6% against the 18% target because of our strong presence in rural and semi-urban branches. We are also providing investment credit. We have extensively covered our customers under the comprehensive Kisan Credit Card (KCC) scheme.
What are your expansion plans?
We will be opening 1,000 branches by the end of next year. Moreover, today, we are adding 75 automated teller machines (ATMs) and aim to establish 2,000 ATMs by next year. We are also planning overseas expansion on medium term basis by opening new branches.