In an interview to CNBC-TV18, Suresh N Patel, ED, Oriental Bank of Commerce spoke about the latest happenings in the bank and the way ahead.
The public sector lender recently cut interest rates on retail term deposits for 1-2 years. He said the bank’s focus will continue to be on retail operations going ahead.
The bank expect to maintain NIMs at current level in the coming quarters, he added.
Below is the verbatim transcript of Suresh N Patel’s interview with CNBC-TV18's Ekta Batra and Anuj Singhal.
Ekta: Can you just go through what sort of cut in deposits have you undertaken by how much and do you think there is more room for deposit rate cuts?
A: We have realigned our rates. According to us our rate was slightly higher, so in the bracket of one-two years it was nine percent. So we have reduced by 10 basis points to 8.9. That is the only change we have done in this bracket and the other rates are same.
Ekta: Do you see a room for further cut in deposit rates from the 8.9 percent and when do you think a possible lending rate cut would be something that Oriental Bank of Commerce (OBC) would contemplate?
A: As far as this bracket is concerned still some banks are having it still lower, but right now we will not take in immediate future any further call on this. We will wait and watch and as regards cutting base rates maybe in the next year i.e. 2015 when Reserve Bank of India (RBI) will give a call on rate cut on repo at that point probably we will decide on base rate.
Anuj: If you could give us an indication by when should we expect lending rate cut, would it be in the first quarter of the next calendar year or maybe in the first half?
A: RBI has already given indications, it is already in their paper. So, if it happens probably at that point of time because right now what we have reduced is marginally only by 10 bps and that too only in one bracket because it was slightly higher.
Anuj: So are you saying that as soon as there is a repo rate cut from RBI that would be the moment that base rate would be cut?
A: We will take a call at that point of time.
Ekta: How are you trending on credit growth at this point, Q2 it was quite subdued with a growth of only around 8 percent odd. Has it picked up at all and what would FY15 entirely look like for OBC?
A: In case of retail there is some growth but other than retail we are not seeing much growth because maybe it will take some time for demand to pick up but in retail of course we are focussing and we have started one new venture under retail where we have opened one specialised branch in Gurgaon where we have put in special staff for that, only for retail so that they will focus on housing loans and vehicle loans. So our focus is more on retail right now.
Ekta: Can you give us a sense in terms of your net interest margins (NIM) because there was a slight seven bps improvement quarter-on-quarter (QoQ) in your NIMs in the previous quarter. Can you just give us a sense in terms of what the cost of funds for OBC is as compared to Q2 right now and hence what would your net interest margins look like?
A: We will be looking forwards to maintain our NIM of September or maybe a slight improvement in one or two bps, it will not go up drastically right now because it is going on a similar trend. Pertaining to your second question of cost of funds, because this rate cut what we have done is only in one bracket and there will be marginal effect on it because we have about Rs 30,000 crore in this bracket and because we have reduced only by 10 bps, so there will be a very marginal difference by that. All other maturity rates we have remained the same.
Anuj: Is the worst of asset quality now behind the Indian Public Sector Undertakings (PSU) banks or can there be some more shocks around the corner over the next three or four quarters?
A: If you see our two quarters in first quarter we had Rs 1,400 crore slippage and in the second quarter it was Rs 978 crore. So there is a declining trend in the second quarter. We are also trying hard, maybe in future this trend will improve and slippages maybe either at same level but it will not go up.
Ekta: So it will be around Rs 900 crore for Q3?
A: Hopefully we will cut in below Rs 1,000 crore only. It could be Rs 100 crore plus or minus but it will not be like Rs 1,400 what we had in the first quarter.
Ekta: What about restructuring. Your pipeline it was mentioned post Q2 stood at Rs 1,000 crore?
A: Yes, in Q3 we expect about Rs 500-700 crore.
Ekta: And what about slippages from your restructured portfolio? What would that trend at?
A: Slippages from restructured portfolio will be there because some accounts are bound to slip. Exact calculations I may not be able to tell you right now, but some slippages will be there.
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