MC Interview | Equitas SFB targeting 25% credit growth in next few quarters: CEO

As far as affordable housing is concerned, it grew at a faster pace of around 60 percent, because it's got a smaller base.

Equitas Small Finance Bank is targeting a credit growth of 25 percent in the next few quarters, said PN Vasudevan, managing director and chief executive officer (MD and CEO). He said that in the mid to long term, the bank’s size and unrealised demand in the segments it is strong in should drive credit growth of around 25 percent.

The bank’s net interest margin (NIM), Vasudevan said, has dropped half a percentage point till now in financial year 2023-24 on account of the high interest rate environment. Further, the bank’s guidance for NIM in FY24 would be at 8.5 percent, he said.

Also read: MC Budget Panel | Banks to continue to face pressure on NIMs, experts say

On the Reserve Bank of India’s (RBI) concern on the high credit-deposit (CD) ratio of some banks, Vasudevan said that the bank’s CD ratio stands at 91.5 percent and is at a comfortable level. Edited excerpts:

What's your assessment of your Q3 earnings?

We had a pretty decent credit growth of about 35 percent and 37 percent growth in deposits. The incremental deposit that we gathered for the third quarter, almost 80 percent, has come from retail deposits.

And there has been some concern raised by the RBI whether banks are supporting growth by resorting to bulk deposits. In our case, our bulk deposit dependence is very much on the lower side.

Our GNPA ratio (the proportion of gross non-performing assets to total advances) increased to 2.38 percent from 2.12 on a sequential basis due to some amount of securitisation.

You saw some compression on your NIMs. What is your thought on that?

Our NIM has been coming down and it was 9 percent last year. This year we have been seeing NIM dropping in the first, second and third quarters and accordingly, we have guided for an 8.5 percent NIM for the full year. The NIM drop is largely because of the rise in interest rates.

Also read: Indian Overseas Bank is targeting credit growth of 13-14% in next few quarters, says MD & CEO

The RBI has highlighted some concerns on high CD ratio. How is your CD ratio working?

Our CD ratio has also been coming down for the last few quarters and it's about 91.5 percent as of December 2023. It is something that we consciously have been working on for the last few quarters, to reduce it from a liquidity comfort perspective.

Which segments worked well for you in Q3?

Our three large portfolios are small business, vehicle finance and microfinance loans. All of them have grown at exactly the same 32 percent level.

As far as affordable housing is concerned, it grew at a faster pace of around 60 percent, because it's got a smaller base.

What would be your outlook for credit and deposit growth?

On a medium- to long-term basis, we have been always guiding that given the size of the bank and given the segments that we are lending to has a large amount of unmet demand, we've always been guiding that we believe a growth rate in the range of around 25 percent for both deposit and credit growth should be something profitable.