Meet the "Best Bank" of India: The Indian Bank



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At the beginning of last year, the heads of a conglomerate headquartered in Mumbai, heavily indebted, sent a senior finance official to Chennai, to obtain a large loan from the bank Indian. The bank weighed the heavily indebted company's proposal, and said a no direct. The weight of the group's high-level promoter did not baffle bank officials.

This relentless clarity in his approach to credit is one of the factors that motivated an unlikely turnaround for Indian Bank, the 111-year-old Chennaihead-based institution. Just two decades ago, he was mired in a corruption scandal and needed a government bailout to survive. His MD was then imprisoned. Now the story is radically reversed. It is one of only two nationalized banks, out of a cohort of 19 people, who made a profit last year. It has the lowest unproductive badets (NPAs) in the industry at a time when the NPA spiral has become a threat to many banks. Its exposure to sectors subject to corporate scandals or bankruptcies, such as gems and jewelry or electricity, is very low.

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<p>  It is an informative tale about keeping to the fundamentals in business.
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<p>  One of the secrets of the lending arsenal of the Indian Bank is to ask for guarantees with sentimental value, such as the ancestral home of a promoter, in addition to primary securities such as the l? ownership of the project and so on. When a loan goes bad, the bank has extra leverage in the negotiations.
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<p>  Remarkably, Indian Bank has no exposure to a number of companies that have recently lost much money, including Kingfisher Airlines from Vijay Mallya and companies such as Essar Steel, Jaypee Infratech, IVRCL, who were referred last year to National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, for a speedy resolution.
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<p>  The NPA ratio of the Indian Bank is one of the lowest in the industry. The crude APN set at 7.37% gross loans and net APM at 3.81% for the 2017-2018 fiscal year. A low APA means that the bank does not have to put money aside to provision it in its books, which allows it to declare larger profits. During the fiscal year 2017-2018, 17 of the 19 nationalized banks were in the red, with only two banks – the Indian bank and the Vijaya bank – that were disadvantaged. The Indian bank realized a net profit of Rs 1,259 crore while the net profit of Vijaya Bank was Rs 727 crore.
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<p>  These results must be against the carnage in the profit and loss accounts of their peer group during the same period. for example, was 12,283 crores in 2017-2018 while for the Union Bank of India, the Bank of India and the Central Bank of India, the net loss during the fiscal year was over 5,000 crores each A major PSU bank, but not a nationalized bank, was affected after five of its badociates – State Bank of Bikaner and Jaipur, Mysore State Bank, Bank of Japan. Travancore State, Hyderabad State Bank and Patiala State Bank – amalgamated.The bank recorded a net loss of Rs 6,547 crore last year.<br />
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Amid this sluggishness in the banking sector, how does a little-known bank with a largely South Indian presence deliver stellar results? ET Magazine met with the bank's senior management in Kishor Kharat, chief financial officer PA Krishnan, executive director AS Rajeev, general managers S Chezhian and M Nagarajan were among those we interviewed.

Safe Exposure

First, the conservative etiquette of Indian Bank, something for which the bank has been ridiculed in the past, suddenly became its main badet . While the February 12 Reserve Bank of India circular that set strict deadlines for insolvency proceedings shocked most banks, the Indian bank breathed easily thanks to the reduction of its burden. Secondly, it is not that the bank has no exposure to companies struggling to repay their debts. Where this is the case, in companies such as Bhushan Steel, ABG Shipyard, Alok Industries, etc., the loan amounts are relatively small. Third, the bank's share of advances in RAM (retail, agriculture and MSME) is 57%, which means that its exposure to business is lower than that of many of its peers.

In power, a sector that has piled bad news on lenders, the advances of the Indian Bank on March 31, 2018 were 10 148 crores, or 6.5% of its gross advances, which is lower than that of his peers. The management of the bank insists that they do not shrink from business loans and are willing to grant big loans, but only to those companies that have proven themselves. Some of his clients, such as JK Tires or Nalli Silks from Tamil Nadu, have been among the bank's preferred borrowers. Fourth, bank managers insist that they do not lend in areas where they do not have in-house expertise. The precious stones and jewelery sector, for example, is a no-go area at the bank. The total exposure represents only 0.05% of the domestic advances of the bank.

Sankara Narayanan, the managing director of Vijaya Bank, the only other nationalized bank to remain in the profit zone in the last fiscal year, also emphasized the virtues of caution in lending. "Our strength is retail with average growth of 25% and risk-weighted badets, we only offer viable business accounts with appropriate collateral and we quickly track recoveries. "

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<p>  Vijaya Bank continued its winning streak, recording a net profit of Rs 144 crore in the quarter ended June 30. The Bank's Results Indian for the period are expected next month.
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<p>  Clearly, being conservative is the new mantra in the banking sector.
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<p>  For Indian Bank, created in 1907, the trip was not without turbulence.
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<p>  A major scam hit the bank in the mid-1990s when Mr. Gopalakrishnan, then president and CEO, gave loans to politicians and undeserving corporations. The bank ended up making a loss of Rs 1,727 crore in 1995-96, something that erased its capital base, forcing the government of India, its largest shareholder, to inject capital and keep the bank afloat. In 2009, a special court of the IWC sent Gopalakrishnan to jail for 14 years, on charges of cheating on loan disbursements.
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<p>  <strong> Business Growth </strong><br />
<br />  The replicas of this scam were so intense that the bank's management over the following decades decided to lend with great caution, sacrificing even the growth of its business. In March 2017, the bank ranked 14th in terms of total activity among nationalized banks. The bank realized that she had to do something.<br />
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In May of last year, a hundred bank officials were taken to Kodaikbad, a mountain resort in Tamil Nadu, to think about the road ahead. It appeared that the bank, which was losing its market share mainly to new intelligent private players, had to restart and choose a fast growth path for its activities. a level of Rs 6 lakh crore in 2022. The recurring feeling at the brainstorming session was: if the Indian Bank, with its sound financial health and weak NPAs, could not take the power of private banks, which would it?

Reaching the target 6 lakh crore in the next four years will be a daunting challenge. The figure is currently Rs 3.71 lakh crore. Can the bank grow quickly without compromising prudence and conservatism? We will know it in 2022.

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