Bank of Maharashtra’s advances to grow 1.5 times the banking industry average in FY24: Chief Rajeev

Bank of Maharashtra (BoM) will grow its progress At about 1.5 times the banking industry average trying to cross the ₹5 lakh crore mark in business (deposits plus advances) by the end of March 2024.

AS Rajeev, Managing Director and CEO, who has been at the helm of the public sector bank since December 2018, noted that BoM will intensify its focus on the loan portfolio against receivables (of fees and rents), provide loans for health infrastructure construction, and continue to advance its momentum on RAM (sale retail, agriculture, small and medium) in fiscal year 24.

in interaction with business lineRajiv said to him The bank whose net profit It has grown steadily from ₹389 crores in FY20 to ₹2,602 crores in FY23 and will soon place qualified founders of equity shares totaling ₹1,000 crores. Excerpts:

The strong capital-to-risk-weighted asset ratio (CRAR) is at 18.14 percent. So, why would you want to do a QIP?

We are talking about a Rs 1,000 crore QIP issuance, consisting of a basic issue size of Rs 500 crore and a green shoe option worth Rs 500 crore, likely in the first week of June.

Capital adequacy, we don’t have any problems. It’s more than 18 percent. After QIP, the government’s stake in our bank will drop to 3-4 percent from about 91 percent now and the capital adequacy ratio will rise to about 19-20 percent.

Since our average loan growth rate is around 25 percent, capital requirements will be in place to support that growth.

As of the end of March 2023, out of 13 major criteria, our bank was the leader in seven (including total business growth, deposits in current and savings accounts, the lowest cost-to-income ratio and net non-performing assets) in the banking sector.

Also read: Maharashtra Bank raised up to Rs 7,500 crore in FY24

How will you reach RBusiness target of Rs 5 million crore in FY24?

Our Board of Directors believes we can increase credit by about 1.5 times the expected industry average of 14-15 percent (which is twice expected GDP growth) for fiscal year 24. Last year, our credit growth rate was about 29 percent, which is nearly double the growth rate of the industry. This has been the case for the past 2-3 years.

Since we expect credit growth of 21-22.5 percent, deposits should grow by 14-15 percent. Deposits in checking and savings accounts (CASA) (current account, savings account) will be kept at around 53-54 percent of total deposits.

Within developments, are there any sectors you want to focus more on?

One of the areas we are looking to expand our presence in is loan against receivables by road toll collection and lease securitization. So, we’re taking a cash flow based approach to financing. The assets we have already helped create through term loans will be further supported by the securitization of receivables. A loan against receivables will also be available to new customers.

We expect this portfolio to grow by at least Rs 8,000 to 10,000 crore this year. In the last 3 to 4 months, we have built up an LRD (Rental Rent Discount) portfolio of Rs 3,000 to 4,000 crore, which includes rent receivables from multinational companies. Last year, this portfolio was only Rs 500-600 crore. There is no NPA in this portfolio.

Our credit mix between RAM: Corporate is 57:43. We’ll continue around that level, with a one to two percent swing here and there.

We support the creation of health infrastructure across the country. There is good scope for increasing loans in this sector.

The RAM sector (retail, agricultural, micro, small and medium enterprises) will grow by about 20 percent without any difficulty. Our main focus is on secured loans. last year, Gold loans grew by about 40 per cent to around Rs. 5,000 crore. And that rate of growth will continue into fiscal ’24 as well. This portfolio is expected to grow to Rs 8,000-9,000 crore by the end of FY24.

Given the government’s drive for capital spending, we see good scope for lending to roads, airports, urban development, renewable energy, and electric vehicles, among others.

Also read: Maharashtra Bank leads the chart of PSU lenders in earnings and loan growth in FY23

Your credit/deposit ratio (C/D) has increased to about 75 percent from about 67 percent a year ago. How much more could this percentage be increased?

Last year, we had an SLR surplus (statutory liquidity ratio) of about 8-9 percent. At the start of fiscal ’23, we have C/D ratio About 67 percent, which rose to about 75 percent by the end of fiscal ’23. We sold five to six percent of our surplus SLR (Government Securities and Government Development Loan) and transferred the proceeds to advances to earn more interest income. In this way about Rs 20,000 crore has been transferred to advances. Now, the excess SLR is only Rs 5,000-6,000 crore. Therefore, there is limited scope for converting an SLR. Of the Rs 50,000 crore deposits we expect to mobilize, we will hold at least 20 per cent interest in SLR. Therefore, Rs. 40,000 crore will be available to support credit growth. Our C/D ratio could be close to 80 percent in FY24.

Is there room to improve the net NPA percentage further?

At 0.25 percent of net advances, we have Net NPA percentage It is the lowest in the banking industry. We intend to keep our net NPA in the 0-0.5% range. Our board fixed the upper tolerance level at 0.50 percent.

We will reduce the total NPA to less than 2 percent by the end of March 2024 (from 2.47 percent as of the end of March 2023) as the recovery is good.

Slips have been reduced to a minimum. Now, at least 1 percent of the assets will slip over a period of time. For example, our slippage in the last three years was Rs.500-550 crore on a quarterly basis. But with this in mind, at least 50-60 percent of these assets will be upgraded in the next quarter. This trend will continue. On average, slips will be 0.75-0.80 percent. But the real bad debt will be between 0.25 percent and 0.30 percent. Therefore, the cost of credit will be minimal. It will be about 0.50 percent annually.

Also read: Maharashtra Bank leads the list of public sector lenders in loan growth and asset quality

Will you be able to lower your cost-to-income (CI) ratio far from the current level of 39.14 percent?

It may be difficult to go into more detail. Globally, too, it ranges from 35 to 40 percent. In India, the CI of banks is a little bit higher because the banking that we do, which includes social banking, is different. Our bank’s CI is the lowest in the banking sector due to the efficiency of our operations. This percentage will be within the range at the level of 40-42 percent. In the past three years, we have opened about 450 branches. So, of course, operating costs have increased. However, we have managed to neutralize this by reducing our branch space and other cost-cutting measures.

With the help of a space audit, we have been able to free up/reduce 6-7 square feet of space across the country over the past 3 years. At the same time, we can open 450 branches. Therefore, there is no further increase in space. While the cost has not increased, our income has doubled.

For example, where possible we have installed solar panel systems for electricity. Earlier, the monthly electricity bill expenditure at head office was $3-3.5 lakh. Now, 50-60 percent of the electricity requirements of the head office are met by solar energy.

Therefore, the head of expenses was audited to reduce costs.

In the past three or four years, we have employed around 5,000 people as part of our expansion plans. This year we will add 300 branches and hire about 1,200 people (including managers, senior managers from other banks, specialists – chartered accountants, lawyers, IT experts and juniors). Now, we have 2203 branches. Our network will expand to 2,500 branches by the end of March 2024.

Last year, 300-400 people from large public sector banks joined us because of good perks, promotion avenues, rewards and recognition.