Page 221 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Financial Institutions and Services

Notes
are Agricultural Debt Waiver and Relief Scheme, which came to an end in June. The
farmers could not take benefits of the scheme and failed to pay their share of dues and
hence around 400 crores has turned NPAs during the quarter. Secondly, few big accounts
having international business became NPAs during the quarter which resulted in slippages
to the tune of 300 crores. These are all one-time exceptional events and shall not have any
repeat impact.
We also started identifying the NPAs through core banking solution. There were some
additions to NPAs from restructured accounts also. However, such NPAs accounted for
11.34 per cent of total restructured advances, which is within our guidance of 15 per cent.
All these aspects put together resulted in an increase in NPAs.

But we have geared up for recovery and upgradation due to which our NPAs are likely to
reduce from 2.79 per cent in September 2010 to 2.30 per cent by March 2011. In the next
financial year, our NPAs position will show marked improvement.
Are your overseas plans on track?
Our full-fledged overseas branch in Kong Hong was opened in 2008. In a span of two years
the branch has crossed business-mix of $1 billion. We made a profit in first year itself. The
business is mainly from Indian corporates and trade finance requirements.
We are planning our second full fledged branch in Antwerp, Belgium. We have a
representative office in Dubai, from where we cover GCC and African region. In West
Asia, we have entered into tie-ups with exchange companies and mobilised 84,000 NRI
accounts.
We propose to convert the representative office in London to a subsidiary. We are opening
representative offices in Toronto and Johannesburg. Right now, overseas operations are 2
per cent of the balance sheet. Our plan is to increase it to 3.5 per cent by 2012 and close to
20 per cent by 2020.
How much capital have you asked from the government?
We have asked for around 1,600 crores. We should be able to get it through a preferential
issue. The Government holding can go up from 55 per cent to around 60 per cent. Then, we
have two possibilities. We can either go for a rights issue, or follow-on public offer as and
when required. Capital adequacy could go above 13 per cent, which should give us an
elbow room for the next two-three years.
Is credit growth a challenge?

The Reserve Bank of India’s guidance is that credit will grow at 20 per cent and deposit at
18 per cent. As on October 29, deposit growth is at 18.5 per cent and credit at 22 per cent.
Both projections are broadly in line now. But the busy season has just started. If the trend
continues, achieving 20 per cent growth in credit by March is not a concern. The only point
of concern is that last year, in the second half credit growth was high. This year, growth
has to happen on a base which was high. The environment supports credit growth — IIP
numbers were good, vehicle sales are high, consumer durables sales are good. Festive
season should support growth in credit.
When are you launching wealth management services?

We are in discussions with two or three players for wealth management. We want to
launch it after we launch our mutual fund business through Union KBC Asset Management
Company. Mutual Funds will be launched by December. We are waiting for final approval
from the Securities and Exchange Board of India.
Contd...

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