IOB aims to boost advances to retail, MSME, agri, corporate sector in FY23

State-owned Indian Overseas Bank (IOB) is aiming to boost advances in retail, MSMEs, corporate and agricultural loans during the current fiscal year, as the lender has substantially brought down the stressed assets on its balance sheet through sustained and targeted efforts.

The outlook of the Indian banking sector is seen to be improving on the back of better credit demand and strong balance sheets, IOB said in its FY21-22 annual report.

In the fiscal year ended March 2022, IOB witnessed doubling of its net profit at Rs 1,709 crore, as against Rs 831 crore in the previous fiscal year, as the bank improved on its asset quality through a multi-pronged strategy and focussed recovery initiatives.

IOB said the asset quality of Public Sector Banks (PSBs) are on an improving trend though some loans are classified as restructured loans under pandemic permitted RBI schemes.

During 2021-22, the gross non-performing assets (GNPA) of the PSBs improved from 9.11 per cent to 7.29 per cent and net NPA from 3.09 per cent to 2.20 per cent.

"The Indian Overseas Bank is aiming to increase advances in the current financial year with secular growth across retail, micro, small and medium enterprise (MSME), and corporate and agricultural loans," Partha Pratim Sengupta Managing Director & Chief Executive Officer, Indian Overseas Bank said in his address to shareholders.

The Chennai-based lender pointed to the revised outlook by the India Ratings and Research (Ind-Ra) on the Indian banking sector from 'improving' to 'stable' for 2022-23, helped by better credit demand and strong balance sheet of the banks.

For next fiscal year, credit growth will pick up to 10 per cent and sees gross non-performing asset (GNPA) ratio at 6.1 per cent.

Sengupta said IOB could reduce its gross NPAs substantially from Rs 16,323 crore to Rs 15,299 crore in FY22 and brought down the gross NPAs ratio from 11.69 per cent in FY21 to 9.82 per cent by as of March 31, 2022 through multi-pronged and focussed recovery initiatives.

On the net NPAs front, it was brought down to Rs 3,825 crore (2.65 per cent) from Rs 4,578 crore (3.58 per cent).

Also, the provision coverage ratio improved substantially at the end of March 2022, to 91.66 per cent from 90.34 per cent, one of the highest in industry, Sengupta said.

"As a result, the bank could register a net profit to the tune of Rs 552 crore for Q4 FY21-22 and Rs 1,709 crore for the whole FY 21-22.

"Bank concentrated on expansion of RAM (retail, agri, MSME) segment advances especially housing loan and jewel loan which is evident in growth of RAM share to domestic advances reaching to 73.35 per cent as of 31st March 2022," he said.

Also, the CASA (current account savings account) grew to Rs 113,877 crore at the end of FY22 from Rs 102,165 crore in the year-ago period, registering a growth of 11.46 per cent. Sengupta said the bank's CASA per cent has moved up from 42.52 per cent to 43.44 per cent.

On the impact of the ongoing war by Russia against Ukraine on inflation, he said the rise in inflation is leading to significant increases in interest rates by central banks and a tightening of monetary conditions to bring inflation back to target.

The war against Ukraine has been accompanied by a sharp rise in inflation under the pressure of food, energy and major commodity prices. Retail inflation of India has breached the upper limit of the Reserve Bank of India's target range for the fourth consecutive time as on April 2022, the official said.

Following the two hikes by the Reserve Bank of India, banks are seen passing on the benefits to customers and increasing their deposit rates. The pace of rate transmission has improved for external benchmark-linked loans, he said.

"We may also see more rake hikes by the Reserve Bank of India in the next couple of MPC to ensure that inflation remains within the target going forward," Sengupta said further.

Going forward, he said with the support of a huge base of several loyal customers and a large base of young, strong and energetic work force, Brand lOB is sure to play an important role in the banking industry.

On the bank's capital raise plans for the current fiscal year, IOB said it will seek shareholders' approval in the next annual general meeting (AGM) scheduled for July 15, 2022 for issuance of redeemable preference shares not exceeding Rs 1,000 crore.