Hope to improve deposit growth ahead: Central Bank of India

Public sector bank Central Bank of India has reported net profit of Rs 404 crore in quarter ended December 2010 as against Rs 306 crore in same period the previous year.

In an interview with CNBC-TV18, S Shridhar, CMD, Central Bank, spoke about the results and gives his outlook going forward. Here is a verbatim transcript of the exclusive interview with S Shridhar on CNBC-TV18. Also watch the accompanying video. S Shridhar: We are able to increase our yield on advances to about 10.58% for this quarter incrementally. Not withstanding the fact that with in consonance with the market our treasury profits have been somewhat subdued. Not withstanding that because of a very strong net interest income, a growth of 96% in this quarter YoY growth, these results have been made possible. Q: Your credit grew at around 27% and your deposit at around over 4.5%, why is there such a gap in the credit and deposit growth? A: First of all, I would say that the total delivered strategy to grow the credit faster, higher than the deposits because of the fact that our credit/deposit ratio last year was below lagging the market. We were only at 58%, today it is around 71% which is not unusually high. Secondly, the deposit growth mass the fact that we have had substantial refinance borrowings from the All India Refinancing institutions whom we have used which we found to be of lower cost than the high cost deposits which otherwise we would have to have contained. These are the reasons why the differential exists. Q: How much is the money that you have got in terms of refinance and going forward how would you look at funding your credit growth? A: The total refinancing that we have availed in this quarter is over Rs 7,300 crore or so. We would obviously match our credit growth and our deposit growth, our resources growth if we put it that way which would be deposits plus other sources. What we are not doing is to fund our credit growth with short-tem borrowings or with access to money market borrowings. We are not doing that. We are not borrowing in the collateralised borrowing and lending obligations (CBLO) market to fund our credit growth. That is something that I wanted. So, going forward, we will be looking at how our deposit growth looks because we have not done badly as far as CASA is concerned. Our CASA percentage is around 35% much better than what it was on December 31, 2009 where it was 29.9%. Our savings bank growth has been about 24% year-on-year. Our current account growth has been about 13% year-on-year. We have launched our CASA deposit mobilisation campaign, there is a fair momentum that has been developed. We have also increased our interest rates on our retail term deposits. Hopefully that will improve our deposit growth thereby we can fund our credit. Q: Do you have a CASA target in mind as for the full year or for the next quarter? A: We have not kept the target because as I said we would like to see how best we can achieve. Q: Also in terms of the impact of rising interest rate how do you see that? Do you expect to pass on to the customer and especially with regards to deposit rate how much more hike could we see in the immediate future? A: That is a very difficult question to answer. We will obviously respond to the market. We are closely in touch with the market. Even in the last one or two months, you must have seen that we have increased our deposit rates. We have not increased our base rate as yet. But there has been some increase in the base rate as compared to the previous quarter, no increase in the base rate in this quarter so far. _PAGEBREAK_ Q: Your incremental credit/deposit ratio is around 70%, do you think that is sustainable going forward? A: As I said I would not like to give any guidance, but what I would say is that we would obviously be looking at our deposit growth and plan our credit growth accordingly. Q: But could we see what is the kind of credit and deposit growth that you would see in the fourth quarter and the last quarter? A: I just do not want to give you that sort of a figure right now because the factors are variable. Q: Not in terms of a figure, but if you can give a general sense of how credit and deposit will pick up in the fourth quarter and will there be a moderation will it do better than third quarter? A: Last year also our CASA growth was also very substantial in the fourth quarter. We have also launched a CASA mobilisation campaign now which I expect to pick up momentum during the current quarter. Initial feedback and results are encouraging. As far as bulk deposit is concerned, there is a question of cost. Q: Also your rights issue is expected to be launched- could you take us through the latest developments and by when do you expect to launch the rights issue? A: We have actually filed the DHRP with Sebi. We are hoping that as soon as the approval comes from them we will launch. Q: By when do you or any idea as to when, will it be before end of this year or next year? A: You will have to ask that to Sebi, not to me. Q: On the provisions for pension liability, do you think the increasing pension liability could impact profitability going forward? A: I think we have not really debated on that issue because that issue has been addressed at the industry level because that has been taken into account while agreeing it, negotiations with Unions. So, having done that, we have to bite the bullet. That