Indian Bank has nod to raise ₹12,000 cr, embarks on a 3-pronged plan to sustain deposit growth

Indian Bank’s Chief Shanti Lal Jain said the Bank has initiated a three-pronged strategy to mobilise deposits, addressing the increasing challenges faced by the banking industry in securing deposits. The Chennai-headquartered Public sector lender also said it has received approvals to raise ₹12,000 crore of funds.

As of June 2024, the Bank’s capital adequacy ratio was 16.47 per cent and with the addition of Q1 profit (₹2,403 crore), the ratio stood at about 17.08 per cent. The bank’s return on average networth was 20 per cent and credit growth was about 12 per cent.

“We are adequately capitalised. But to support future credit growth in tune with the economic growth, we have the board as well as shareholders’ approval to raise ₹5,000 crore in equity, about ₹2,000 crore in AT1/Tier 2 bonds, and ₹5,000 crore in infrastructure bonds. We will proceed with the fundraising at an opportune time during this fiscal year,” Shanti Lal Jain, MD & CEO of Indian Bank said here.

For the current year, the bank is targetting 11-13 per cent growth in credit and 8-10 per cent growth in deposits.

Discussing deposit growth, Jain admitted that securing deposits is becoming a challenging task for banks as the funds shift to other avenues such as mutual funds and government securities, etc. However, he noted that liquidity is available in the system at a slightly higher cost, with the main challenge being the acquisition of CASA (current account savings account) deposits.

To meet its deposit growth targets, the Indian Bank has implemented three key initiatives. The bank has established approximately 100 resource mobilisation centres and deployed around 400-500 personnel to these centres. “Their role is to engage with HNI customers and institutional clients to secure business. We have also partnered with 135 fintech companies and launched a customer experience department to analyze and cater to customer needs. With these steps, we aim for a 10 per cent growth in deposits,” Jain explained.

Regarding asset quality, Jain emphasized the Bank’s focus on recovering more from NPAs than the slippages. The bank aims to recover about ₹7,000 crore in FY25, including ₹400 crore from the sale of NPAs to Asset Reconstruction Companies (ARCs), after recovering ₹8,800 crore in FY24.

Jain also mentioned that the bank has around ₹40,000 crore in loan sanctions in the pipeline. Indian Bank plans to open 100 branches this year, having opened 75 branches last year.

Discussing digital banking, Mahesh Kumar Bajaj, Executive Director of Indian Bank, highlighted the significant growth in the digital business, which has quadrupled from ₹9,116 crore in June 2023 to ₹36,678 crore in June 2024. “Since April 2022, we have implemented 84 digital journeys. The migration from branch channels to digital channels has increased to 90%, with mobile banking users rising by 33 per cent to 1.75 crore from 1.31 crore.

The bank continues to invest heavily in technology, launching six new digital journeys in the June quarter, with plans for 15 more this quarter and 44 for the entire year,” Bajaj added.