To reinforce its standing as a commercial bank, IDBI Bank has drawn up a strategy that entails going all out to mop up low-cost current account, savings account (CASA) deposits, going slow on fund-based exposure to infrastructure projects even as syndication and advisory services for such projects are actively pursued, and stepping up priority sector lending.
The urgency to grow CASA deposits is underscored by the fact that in the case of IDBI Bank such deposits constituted a mere 14.5 per cent of the total deposits (of Rs 1,54,305 crore as of end-September 2010) whereas in the case of public sector banks the average is 35-45 per cent.
To catch up with peer banks on CASA, the bank has assigned four executive directors with additional responsibility to ensure CASA growth in their respective zones. Each ED will be assisted by a Chief General Manager.
IDBI Bank has set a target to improve CASA to 18 per cent of total deposits by March-end 2011 and 22 per cent by March-end 2012.
Assets, liabilities
On the assets side of the balance sheet, while the bank expects complete drawdown of sanctioned loans aggregating around Rs 11,000 crore (of which Rs 6,000 crore is fund based and the balance is in the form of letters of credit and bank guarantee) to infrastructure projects in the next couple of years, it will go slow when it comes to fresh exposure to such projects in view of the low CASA base.
“On the liabilities front, all our energies will be devoted to ramping up CASA deposits over the next couple of years. To sustain our net interest margin, which is currently at 2 per cent, we plan to garner more CASA deposits. To improve our fee income, we will focus more on syndication and advisory services. However, we will not aggressively grow our infrastructure lending portfolio,” said Mr P. Sitaram, Chief Financial Officer, IDBI Bank.
The bank's corporate vertical has been assigned additional task of marketing to companies its cash management services, opening current and salary accounts, and winning dividend payment mandates, he added.
On the priority sector front, the bank wants to break fresh ground in agriculture lending in States beyond Maharashtra . The erstwhile, United Western Bank's portfolio forms a chunk of IDBI's agriculture lending portfolio of around Rs 3,300 crore. IDBI Bank took over UWB in 2006.
The bank, according to Mr Sitaram, is focusing on opening more branches in the semi-urban and rural areas so that CASA deposits can come up to the industry average and the mandatory priority sector lending target can be met. The bank plans to ramp up its branch network to 930 by March-end 2011 (from 760 now) and 1200 by March-end 2012.
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