Karur Vysya Bank's intention is to grow granular: MD & CEO R Ramesh Babu

Century-old Karur Vysya Bank never chased growth like some of the high street banks of Mumbai. Still, it managed to draw investor attention. R Ramesh Babu, managing director (MD) & chief executive officer (CEO) of the old-generation private bank, said he is confident that it will improve its market share with the momentum gained in recent years, in an interview with Manojit Saha.

Karur Vysya Bank is more than 100 years old. The loan book of the bank, as at June end was Rs 59,612 crore and it has deposits of Rs 71,168 crore. Don’t you think the bank has lost out to competition over the years in increasing market share?

We need to see it from a different lens. Initially, when the bank started, it was catering to local traders and had a limited area of operation. A larger presence has come 20-25 years back. If you look at our portfolio also, we entered wholesale and corporate lending around 2008-09. And, in 2018-19, we entered the retail segment. That way, progressively, we have grown vertical after vertical. Now, an entire suite of products is being offered. From the momentum we have gained, we are confident of increasing the market share.

Out of the 822 branches, more than half are in Tamil Nadu. The other branches are mostly concentrated in Andhra Pradesh, Telangana and Karnataka, and there are some branches in Maharashtra and Gujarat. Will you continue to be predominantly south based or is there a thinking to open more branches in other parts?

We have a branch in Patna, we have a branch in Indore and in Chandigarh. We have branches in different locations but the concentration is in the South and West. We feel there is a lot of potential still in these areas. When we go for expansion, we look at what are the opportunities available and based on that we are expanding.

The post earnings presentation shows that 68 per cent of corporate loans are less than Rs 100 crore. Average ticket size is Rs 37.72 crore. It looks like a conscious strategy to stay away from large wholesale loans? Why is it so?

It is not a question of staying away. When the infrastructure boom was going on in India during 2011-12, we also joined the bandwagon. We also need to understand the size of the bank, whether we need to compete with the bigger banks. In this process, we had some hits and misses in corporate lending. With that learning, we have put restrictions in the last few years. One of the conditions, for example, is that beyond Rs 125 crore, we will not take an exposure. This is because if something happens tomorrow, we will not be able to absorb the shock. So, we have diversified our portfolio and the intention is to grow granular. In 2016, corporate was 35 per cent of the loan book and has now come down to 23 per cent. The shift has taken place because we have decided to move from lumpy accounts to granular. In the process, what we have achieved is, if you look at SMA (special mention accounts) of 30 days plus, it is below 1 per cent. Of this, the corporate book is minuscule. The quality of the book has improved.

What is the share of retail loans?

Commercial is the next big segment, and also retail. Retail is 23-24 per cent of the portfolio, out of which 50 per cent is home loan and loan against property. We want to push jewellery loans and personal loans this year.

The bank has revised the credit growth target for FY23 to 15 per cent from 12 per cent. What made you revise the growth target?

In April, things were a bit uncertain. So, we wanted to be cautious and thought that under promising and over delivering will be better. So, we projected 12 per cent growth. After seeing the first quarter, we have grown 15 per cent in advances. We thought that if we could do well in the first quarter, we could do much better in the next few quarters.

Stressed asset pool continued to decline for the fourth consecutive quarter, partially due to higher write-offs. Do you expect recoveries to be more than slippages in the current financial year? Where do you see gross NPA (non-performing asset) numbers at the end of FY23?

When I took charge, I said recovery is equally important as business. We have created a recovery vertical headed by a senior general manager. In the last four quarters, our recoveries are more than the slippages. We think the same trend will continue in the coming quarters.

Where do you see the gross NPA and net NPA ratios by the end of the FY23?

We have brought down gross NPA to 5.2 per cent, which was earlier 8.8 per cent. We want to bring it to below 5 per cent by the end of the current financial year. We have a three-pronged strategy to bring down net NPA. One is recovery. Owing to recovery efforts, net NPA has fallen to 1.91 per cent. Also, the book is growing and to some extent prudential provisioning is there. With all these together, our plan is to bring down net NPA to 1 per cent by the end of FY23.