Central bank is coming out with an issue of eight crore shares in the price band of Rs 85-102 per share.

H A Daruwala, CMD, Central Bank, said the issue proceeds are going to be used for the technology platform, HRD development, and for business growth.

Excerpts from CNBC-TV18’s exclusive interview with H A Daruwala:

Q: Rs 1,000 crore is what you are looking to raise at this point in time, is that the entire amount that the bank requires? Outline the growth plans, and where would this money be deployed going forward?

A: We are coming out with our issue at breakneck speed. The proceeds are going to be used for technology platform, HRD development, and for business growth.

Q: Your advances and deposits grew by about 38% and 25% respectively in FY07. Is that something that you see sustained going into FY08?

A: For FY08, we have set a deposit and advances growth target of 21% and 25% respectively. However, this does not stop us from exceeding those targets by a higher percentage. Our growth will not fall below these targets. We do not want these targets to be present just on paper. When we do these exercises, the idea is that it has to be executed, implemented and must be done in the right spirit.

Q: You will continue to hold your spreads at 3.16% or do you hope to better that as well?

A: We will better our performance and that’s what we are looking out for.

Q: Could you tell us how much you can better that in FY08?

A: Our net interest margin is currently at 3.16%. We expect it to continue to grow. Last year, it took a dip because the average working funds had gone up and the yield on investments had come down. We are taking care to ensure that NIM does go up this time and I am quite confident that it will go up to at least 3.2%.

Q: Your housing and retail loan as a percentage was about 11% in FY07. Is that something you will look to maintain in light of what’s happening with interest rates at this point of time or is that something you look to tweak?

A: At present, my retail loan is 11%. But when you look at it in percentage terms, you find that it is very small. For FY08, we intend to take it to 13%. 50% of my retail is in the housing loan portfolio. We have gone slow on personal loans and not on any other retail loan schemes. We are confident that retail loans will take shape. It is not that they will not take shape.

Q: Can you comment a little bit more about the net NPA levels, which stand at about 1.7%. The recovery rate at this point in time and what do you foresee the NPA to be for FY08?

A: For FY08, net NPAs will be brought down to less than 1%. We have our debt recovery tribunals and the Sarfaesi Act is in place. We are confident that it will also assist us. We want our willful defaulters to settle for a compromise proposal and do a one-time settlement with us. This is what we are looking out for. I am not too sure whether I would be selling any of these assets to ARCIL, as I am very confident of recovering much more than what I sell to them. All these things are in place along with our cash recovery and upgradation targets. We are closely monitoring our special mention and early alert signal accounts. I am confident that the fall would already be there in the newly surfaced NPAs too. 

Q: Could you talk about the drivers or levers that you would be exercising to maintain or achieve those targets? Your CASA currently stands at about 42%. Are you going to be currently mobilizing your resources on the low cost deposits side?

A: Our CASA is 42% and this year we intend to bring it to 45%. We do have a very good PAN India presence. We also have very good rural and semi-urban branches. Almost 1,700 of my branches are in the rural and semi-urban sectors. We definitely drive through our deposit mobilisation. We have got our strategies in place and have already informed branch managers on what is required to be done, in order to ensure that we get our CASA. I am very confident that my CASA will grow at 45% and we will be in a position to sustain our credit growth too.

Q: What is your call on interest rates right now and what the RBI may go ahead and do for the rest of this calendar year? What is your take on interest rates surrounding the housing scenario at this point of time?

A: I can only state it in this fashion, history will repeat itself. Lending rates have to go down. I am not saying that they should not go down. We have seen that in the last 4-5 years, when the lending rates were low, that the economy did take off. At present, the only factor is that deposits and interest rates have to go down. Once that goes down, there is nothing that is going to stop the economy from taking its absolute rightful place in the international world.