To maintain NIMs at current levels: Indian Bank

Indian Bank

MS Sundara Rajan , CMD, Indian Bank said that the bank's Q1 net interest margins are at 3.46% versus 3.34% YoY. They are looking at an advances growth of 20% and a deposits growth of 25%. The bank is confident of maintaining NIM s at current levels.

Excerpts from CNBC-TV18's exclusive interview with MS Sundara Rajan:

Q: What’s the picture on the net interest margins in this quarter? What is the outlook over the next few quarters on the sustainability of these NIMs?

A: The net interest margin for the quarter ended June '07 was at 3.46% compared to 3.34% in the similar quarter of the last year. The bank is growing on the interest income at the rate of 25.80%. The bank has grown to the extent of 19.82% on the net interest income and the operating profit has gone up by more than 40% from Rs 230 crore for the last year in June, to Rs 330 crore for the current year, June '07. On the net profit front from Rs 164 crore to Rs 212 crore.

Besides this, one point that has appreciated, is the non-interest income portfolio, where we made substantial progress, a whopping increase of 88%, which the bank was able to register. The non-interest income has gone from Rs 92 crore to Rs 173 crore, so I am confident that we will be able to maintain the net interest margin.

Q: To maintain the 20% NII growth, what will be required in advances and deposits growth for the next few quarters?

A: We are planning to grow deposits by 20% and the advances by 25%. In the current year, the deposits have grown by 19.63%. In the deposit growth, nearly 99% growth is in core deposit. The bank will be concentrating on the growth of the core deposit; will increase the share of both the current and the savings deposit towards sustaining this.

Similarly, the bank will also be looking out for their high-yielding advances by restructuring the portfolio and ensure that the non-interest margins will be maintained.

Q: What do you see in terms of NPA recovery, in the next two-three quarters and how significantly will it contribute to your profitability?

A: In the first quarter itself, we were able to recover NPA by about Rs 97 crore compared to Rs 74 crore YoY. Last year, we were able to recover about Rs 670 crore. The bank will sustain effort and continue at the same level. Last year, around Rs 300 crore was added to the bottomline through the recovery of this NPA. I see the same trend continuing this time too.

Q: Within the next two months, are you expecting to make any changes in your interest rates or deposit rates?

A: Indian Bank’s interest rates, both on the advances front and deposits front, are somewhat low. Our prime-lending rate on advances is 12.5%, which is the lowest in the industry. Similarly, we are offering about 9% on the one-year deposit rate, which we would like to sustain because of inflation. We find there is no reason for us to increase the interest rate on deposits and advances. We will continue and we will be able to maintain this margin also.