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00:00Welcome back. Thanks for staying tuned to the Small and Mid Cap show here on NETV Profit.

00:04Well, we have with us now Ajay Srivastava, MD, CEO at Indian Overseas Bank to talk to

00:09us about numbers and Q1 results. Welcome, Mr. Srivastava. You know, first off, I want

00:14to try and understand the margin profile that one can expect going forward. We've seen a

00:19bit of, you know, a bit of fluctuation when it comes to margins over quarters. So talk

00:25to us about where should margins settle in and what are the variables that are affecting

00:28it. The margin which we are looking at and we have planned will be around 3.10% for this

00:36financial year. And March was an aberration because of one time some increase we have

00:43there because of that NIM improved to 3.53%. But going forward, the stability will be around

00:503.10%. And the major factor which is impacting NIM is, of course, deposit cost. This is a

00:59money in the market and it has become very costly. And we at IOB also, we are looking

01:07at this situation. We invested at least 15 to 18 months back and we came up with a deposit

01:14plan of 444 days, special deposit plan in which we are giving 7.30% which is the highest in the

01:22system. And since this scheme is in place for last 15 to 18 months, the cost has already been

01:29factored into this NIM. And the cost of deposit, even after doing this 444 deposit, for the month

01:40of June, it was at 4.95 only, well below 5. Got it. And sir, just with regard to deposit

01:48costs overall, if I can cap this point. So, you believe that deposit costs have now peaked,

01:54nothing to be repriced as of now? Repricing has happened over last year to a larger extent.

02:01Still a part of that is still there in the system, maybe another 4, 5, 6 months it will go on.

02:06Okay. And one more factor for IOB is there which is very critical is that on a continuous basis,

02:13we have been maintaining our CASA ratio above 42%, around 40-43%. And despite all the challenges,

02:21we have grown in CASA year on year, if you see, June to June, we have grown by almost 8% in CASA.

02:27And in this financial year also, Q1, sequentially if you can see,

02:31March over June, we have been able to maintain the level, we have not gone down.

02:36Okay. And with regard to where growth goes from here,

02:45talk to us about what the loan growth expectation should be, what the deposit growth expectation

02:49should be. Loan growth, we are planning to grow by around 12-13%. Deposit growth, last year,

02:57if you see, June to June again, year on year, we grew by 13%. This year, looking at the challenges

03:04ahead, we are planning to grow by around 11-11.5% in that range only, deposit growth. And credit

03:10will be around 13% growth. Our CD ratio is at 77%, which is very much comfortable. So,

03:17that is the plan for this year. Got it. And sir, you have spoken of 4-6 more quarters of

03:23pain when it comes to cost of deposits. 4-6 months. Okay, 4-6 months. Yes, yes, 4-6 months.

03:29Yes. So, does that mean that your margins, which are currently at 3.06,

03:35what gives you the comfort that it will remain at or around the 3.1% mark? Are you going to

03:41increase loan yields? Is that what the expectation is, therefore?

03:46Yeah, that is one part of it, that of course, whatever you are going to lend, this additional

03:50cost has to be factored in. And this is getting factored in for the last more than three quarters,

03:56I will say. Customers also understand this. And we are watching good demand as far as credit

04:04department is concerned, whether it is retail or MSME or even corporate at the increased rate

04:10of interest also. So, that is one factor to which it will be factored in. And the second factor is

04:16that CASA, of course, we are very aggressive on CASA. Last full year, we onboarded 2.5 million

04:22new customers, new accounts, as far as CASA is concerned. And in those accounts, as of yet,

04:27the balance is around 9,000 crores plus. In Q1 also, we have onboarded around 10 lakh new customers

04:32for CASA customers only. And in those 10 lakh accounts, we are having around 1,900 crores of

04:38CASA as of yet available in those accounts. So, onboarding of customers is going to be the

04:43major part of the strategy for this financial year through CASA accretion and through little bit of

04:50increase in rate of interest as far as lending is concerned. I think we will be able to maintain

04:55the amount around 3.1 million. Okay. And if I can switch across to

05:01asset quality, what is in the pipeline? Where will NPA ratios go? You have had near zero

05:09slippage in corporate as per your presentation. Talk us through some of those factors that are

05:14playing out. Yeah. Slippage has been, I will say, one of the top most priorities for us at IOB.

05:23And last 18 months, I would say six quarters, there has been no slippage as far as corporate

05:29loans are concerned. Whatever slippages have happened, that is in RAM only. And RAM also,

05:34the numbers, quarter on quarter, these numbers are going down. For this quarter, June Q1 quarter,

05:44our total slippage is 277 crores only, all consists of RAM, over a credit base of 2,29,000

05:52crores. So, the slippage ratio comes around 0.13%, which is so far the lowest. For last

05:59financial year also, our slippage ratio was 0.87, less than 1%. So, slippage is one of the priorities

06:08and I am very happy to share the fact that the efficiency level as far as slippage control is

06:16concerned, that has reached that level where we can safely say that going forward also,

06:24slippages will be under control. There will not be any shock going forward.

06:28Understood. And on the recovery side of things, if you can talk to us about what the expectations

06:33are, what has happened in Q1 in terms of recoveries and what can we expect from Folio FY25?

06:41We did 582 crores of recovery in Q1 and for the full financial year, we are looking at 5,500

06:48crores of recovery and we are pretty confident that we will be able to do it. In Q1 itself,

06:54we started very aggressively regarding sale of assets to ARCs, the process is still going on

07:00and we hope that we will be able to surpass this 5,500 crores.

07:06Got it. Sir, one space where I have seen very strong loan growth coming for you is the

07:11agri space, almost 10% or 9 plus percent sequential growth. What is leading to this

07:19extremely strong growth in agri? Two factors are there. One thing is that

07:25earlier, the concept of agriculture used to move around KCC and Raptor loans and other

07:33ancillary things. Over the last 3-4 years, many corporate type of loans have also been made part

07:40of agriculture, including ethanol project, food processing and many other things. So,

07:45that is one part that even at corporate level, 30, 40, 50, 80 crores also, 100 crores also,

07:50it gets classified as agriculture. That is one part. And second part is that being in

07:55the southern part of the country, we are having almost one-third of the branches here in Tamil

08:00Nadu and here J&L loan, agriculture J&L loan is also a major factor through which

08:05agriculture growth is happening. Understood. So, on the corporate side of things,

08:10do you expect the corporate CAPEX cycle to pick up because you have shrunk your book in corporate,

08:16now around 27 odd percent of your book is corporate. Do you expect that to start to

08:23inch up if the CAPEX cycle were to come through? What's the strategy on the corporate side of

08:28things? Exactly. See, we have already gone to the board and we have recalibrated our strategy

08:36and we are looking forward to increase corporate book by around 35 to 40 percent.

08:44Ram, we are planning to reduce between 60 to 65 percent. Right now, it is 72 percent. So,

08:48the 72 will come down to maybe around 60 to 61 percent, Ram. And the corporate book we are

08:55going to increase. Of course, the demand is there and we have been able to lend, we are lending to

09:00corporates. And of course, as I said in the beginning that it is all a matter of pricing

09:05and what value we are getting. Based on that, if it suits our requirement, if it matches with our

09:09priorities, we are absolutely going ahead. Okay. And how quickly will this happen? Because

09:14it's a big shift from 27, you virtually have to deploy 20 to 30 thousand crore or

09:20rejig 20 to 30 thousand crore between Ram and corporate if this were to happen.

09:25Yeah, it has to depend on deposit accretion also. Whatever we have planned, around 10 to 11 percent.

09:33Last year, we also grew by 13 percent. So, we do not see any challenge. Based on that, it may not

09:37happen instantly, but that is the intent. And I think by the end of the year, we will be closer

09:43to that mark. Okay. And sir, with regard to ROA, you are at 0.7. What are the levers for ROA going

09:51forward? Where should it go? Ideally, we are looking forward to grow beyond 1. Okay. And how

09:59quickly? Maybe that is what I am trying to say. Maybe Q4 of this year, maybe Q4 of this year it

10:05will happen. Okay, understood. And sir, any divestment expectation from the government

10:11that you are aware of? No, we have already taken approval of board and shareholders for raising

10:175,000 crores worth of capital. That is already under process. We have got these two major

10:23approvals. And by year end, we are planning to do this 5,000 crores. Okay, but no divestment

10:30expectation per se overall from… We have not heard. We have not heard.

10:36Understood. Understood. Thank you so much, sir. It has been a pleasure speaking with you,

10:39Mr. Srivastava. It is good understanding the metrics of IOB. We will of course interact

10:47with him again at the end of Q2 to try and understand how progress is. But with that,

10:52all the time we have on the show for you today. India Bulls housing finance is now Samman Capital

11:00Limited. Jio Samman se and keep watching NDTV Profit for all your business and stock market updates.

What's In Store For IOB In FY25? | NDTV Profit

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