Here's how South Indian Bank expects to grow in FY14

Moneycontrol Bureau

Private sector lender South Indian Bank (SIB) disappointed the street by reporting a 6.5 percent fall in the third quarter net profit at Rs 115 crore. Its shares dropped more than 3 percent on Friday to close the day's trading at Rs 23 on the NSE.

According to V A Joseph, MD & CEO of the bank, the lender made an one-time loan provision of Rs 60 crore in April-June quarter against a particular loan account with an exposure of Rs 150 crore. In the rest of the year, the lender is expected to grow better.

"We have been providing for that bad loan account for Rs 30 crore in the last three preceding quarters. We had a permission from the Reserve Bank of India (RBI) to complete the residual provisions by March 2014. However, we decided to do it in the first quarter alone," he told moneycontrol.com in an exclusive interaction.

Also read: South Indian Bank Q1 net falls 6.5% on higher provisions

The lender had lent Rs 150 crore to the National Agricultural Cooperative Marketing Federation of India (NAFED). The account had turned as bad asset requiring a 100 percent provision for the credit exposure as per RBI norms. SIB had provided Rs 30 crore each for three consecutive quarter starting from Q2, FY13.

The bank expanded its loan book by 15 percent to around Rs 31,500 crore. The gross non-performing asset (NPA) ratio rose to 1.52 perecent as against 1.08 percent a year back. Net NPA ratio shot up to 1.12 percent compared with 0.35 percent.

"We will not grow our loans aggressively in FY14. If the economy revives in the second half of the year, we will be eying for 20-23 percent growth in both credit and deposits. We are focusing more on retail loans. Currently, its share stood at 45 percent of the loan book. We will definitely try to make it larger," Joseph said adding that it is difficult to predict how much would be the retail expansion in the current economic context.

The bank has started creating specialized branches for retail loans especially for housing and auto loans. It currently offers 10.50 percent rate of interest up to Rs 30 lakh on home loans and 11 percent up to above Rs 30 lakh. Auto loans are offered at 11.5 percent for vehicles up to Rs 10 lakh of worth while it is at 12 percent above the stipulated ceiling.

saikat.das@network18online.com