Mumbai: Indian Bank Managing Director and Chief Executive Officer Binod Kumar has said the Reserve Bank of India’s (RBI) 25-basis-point repo rate hike is unlikely to significantly affect the bank’s asset quality, while acknowledging that some retail borrowers could face repayment pressure due to higher equated monthly instalments (EMIs).
In an interview with The Indian Express, Kumar said the bank expects to maintain stable asset quality and profitability in the coming quarters, despite intense competition for deposits and evolving interest rate conditions.
“Some pressure” could emerge among retail borrowers who are already at the maximum level of EMIs they can afford, he said, adding that banks could consider extending loan tenures or resetting repayment schedules to ease the burden.
On the interest rate outlook, Kumar said future movements would depend largely on inflation trends, US Treasury yields and monetary policy decisions in the coming months.
The bank has been recording credit growth of around 18-19%, but Kumar said its preferred growth range is 14-15%. Retail credit is expected to expand by 15-17%, while corporate lending is projected to grow in the lower double digits.
Housing and mortgage loans have registered growth of around 28-30%, although the portfolio remains relatively small.
Kumar said demand for corporate credit remained healthy, particularly for green energy and data centre projects. However, he expressed caution about lending at very low interest rates, citing funding costs, operating expenses and the long repayment periods involved.
Deposit mobilisation, particularly current account and savings account (CASA) deposits, remains a major challenge for banks. Kumar said Indian Bank had generally managed to keep the gap between deposit and credit growth at around 1-1.5 percentage points.
He added that higher lending rates could support the bank’s net interest margin, potentially improving it by around six basis points.
The bank’s retail portfolio has shown no significant signs of emerging stress, Kumar said, noting that its special-mention account book declined sequentially from 4.79% to 4.19%.
Indian Bank’s gold loan portfolio stands at around Rs 1.4 lakh crore, with rising gold prices contributing to an increase in loan values. The bank’s capital adequacy ratio is 16.21% and could rise to around 17.5% through retained profits. Kumar said there was no immediate capital requirement, though the bank may consider raising around Rs 2,000 crore through Tier-II bonds if market conditions are favourable.
The lender has budgeted approximately Rs 2,300 crore for technology expenditure this year, including investments in artificial intelligence (AI), customer service, data management and models for micro, small and medium enterprises (MSME) lending.
Kumar said AI was more likely to transform banking jobs than eliminate them, with new opportunities emerging in the development and management of such systems.
For the second quarter, deposits grew by 12.5%, while credit expanded by 16.39%. CASA deposits rose 13.77%, and net interest income increased 18%. Gross non-performing assets declined to 1.61% and net NPAs to 0.14%.
The bank expects growth of 12-14% in the third quarter while maintaining profitability and asset quality, Kumar said.
