Improving priority sector lending norms main focus: IDBI

He also says that for IDBI infrastructure was not the cause of NPA or restructuring pain last year. On the other hand, pains came in from other sectors. Like last year, this year also we will continue to focus on the priority sector lending norms.

Below is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video.

Q: Less movement is seen in diesel, which is one of the pre-conditions for fiscal consolidation. What is your expectation on rates front?

A: I do not expect any immediate policy announcement from the RBI. The macro economic indicators are still not showing concrete indication for policy movement either in one direction or the other. I would expect the RBI would continue to watch these indicators carefully as it moves towards June 18 announcement.

Q: Your asset book currently has an exposure of 25% in infrastructure. Will asset quality worsen further or is the pain already in and it could stabilise in FY13?

A: Infrastructure was not the cause of NPA or restructuring pain last year. On the other hand, pains came in from other sectors. Issues in infrastructure sector are being gradually addressed through policy announcements and resolutions that will take some time to resolve. Immediately, this year infrastructure sector is not a concern.
 
Q: Is IDBI expecting further restructuring in other sectors?

A: We do not expect much of restructuring in H1 of this year. Economic indicators, interest rate movements and euro scenario will decide further restructuring, if need arises. As of now, there is nothing much in pipeline.

Q: Your tier I at 8.4% you had a recent issuance but despite that it is not very high would you be in the market to raise equity in the near term. Do you think you will need equity for growth in coming two years?

A: 8.4% is a comfortable figure and meets minimum regulatory norm of 8%. We are not targeting a very large advance growth this year as we continue to focus on improving our private/priority sector lending. 8.4% is largely composed of equity.

We don’t have any preference capital. We don’t have any immediate capital requirement. As the asset book grows, we will reassess our position but there is no immediate pressure for that.

Q: Can we expect any rate cut in this calendar year?

A: Yes. It is possible. RBI will be watching the various economic indicators and if the main focus is inflation and the other factors are behaving up to its expectations I would not rule out a further cut.

Q: IDBI had improved NIMs of over 2% in the last quarter. Are you expecting a further improvement in Q1?

A: Yes, to some extent the equity infusion and conversion of tier I bonds will help us to add direction. Combination of these entire factors along with any further rate cut will help us to improve our NIM by 15-20 basis points.

Q: Many brokerages are cutting India GDP forecast. How are you seeing the credit demand picture for the bank in FY13? Are we likely to see a slow down in the economy per se?

A: Like last year, this year also we will continue to focus on the priority sector lending norms. We have not been emphasizing too much on the overall loan growth book because we would like to keep the priority sector lending demand for the next year at a lower stage.

We are targeting 15% growth in advances, out of which large portion will be from the priority sector portfolio. We are not looking at any major new credit proposals or trying to grow the non-priority sector book in any big way.