Main focus on SME sector & retail: DCB

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Main focus on SME sector & retail: DCB

Chairman of Development Credit Bank Nasser Munjee says that the bank's focus will be the SME sector strategy and retail. Munjee further said that DCB is very keen to push CASA, current account and savings account.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Development Credit Bank to list on Oct 27 Nifty BSE | NSE 01/06/12 Are Mutual Funds betting on Nifty?

Q: Will the bank look at inorganic opportunities to strengthen its presence?

A: Yes certainly. Our focus at the moment is to strengthen the institution as a bank, we are not looking at inorganic growth right away, we have to come to it from a position of strength and that's what we are trying to do in the initial phases. Strengthen the balance sheet, make sure that we have a very, very sound management and I think few months from now, we could look and examine options.

Q: What will be HDFCs role, will it be like a financial investor or will it  be participating in the management of the bank in anyway, or will it want to shore up its shareholding in DCB at any future date?

A: HDFC came in purely as a financial investor, they have no seat on the board and no say in the management, it is a pure financial investment.

Q: Could you give us a number for what you think your adjusted book value will be by the end of this year?

A: Depending on the strength of our recoveries, which is now going full stream, our adjusted book would be around 22 post IPO, hopefully we will go up a notch or two.

Q: Do you see the next few quarters as being the stronger one for the banking space, in terms of interest rate concerns abating a little bit?

A: Liability growth is going to be a major issue as there is a huge demand on the credit side of the economy. So interest rates may tend to strengthen rather than weaken and margins may be under strain in the banking industry.

I am just hoping, if we do have a very strong current account and savings account, that's the saving grace and the other one is to reduce the cost of funds as fast as possible. DCB has an advantage, in the sense, that we have not exploited all our branch network to the full extent, I think we can actually measure up to that and we have a competitive advantage here.

Q: You have a bit of a legacy problem in terms of quality of the balance sheet, dipping net worth, losses over the last few years, but by which quarter do you think you can affect a complete turnaround at the bank?

A: Actually, it has already happened. We had a Rs 160 crore loss last year, we took about Rs 85 crore loss this year. We actually went into full provisioning for everything. Our coverage ratio is now 72% and we have our first quarter profit and first half profit this year, which we will be announcing soon. So, the bank has turned around.

Now that the capital is in, that will allow us to grow the balance sheet and there has been a lot of backlog, in terms of lending to our existing customers as well as our new customers. So I think we should see very robust growth in the next two quarters.