IDBI Bank may explore avenues to grow its corporate credit book, especially in the mid-corporate segment, in a risk-calibrated and cautious manner, following the exit from the Reserve Bank of India’s (RBI) Prompt Corrective Action (PCA) framework, according to MD & CEO Rakesh Sharma.
The bank’s loan book composition of retail to corporate advances was at 62:38 as at end-March 2021, against 56:44 as at end-March 2020.
When IDBI Bank was brought under PCA in May 2017, its loan book composition of retail to corporate advances was at 43:57.
“The exit from the RBI’s PCA framework (with effect from March 10, 2021) has unlocked huge potential for your bank as it can now undertake a wide-range of banking activities and tap the emerging opportunities to boost its business performance. Your bank will continue to remain committed towards its strategic positioning as a retail-oriented bank with focus on growing the share of the loan book of retail and small & medium-sized enterprises,” Sharma said in a message to the shareholders.
When RBI initiates PCA for a bank, it imposes restrictions on the expansion wholesale portfolio, branch expansion, dividend distribution, among others.
PCA is invoked by RBI when a bank breaches any of the four risk thresholds relating to capital, asset quality, profitability and leverage.
IDBI Bank was able to reduce its Risk Weighted Assets (RWA) from Rs 1.59 lakh crore as at end-March 2020 to Rs 1.57 lakh crore as at end-March 2021. According to Sharma, this was a consequence of shifting towards a more retail-oriented portfolio mix, coupled with certain strategic capital conservation measures.
The IDBI Bank Chief said, “Since the muted operating environment clouds the outlook for the lending activity, your bank will focus on maximising fee income. At the same time, to boost the bottom-line, your Bank will work towards minimising its operating expenses and increasing productivity.”
MR Kumar, Chairman, IDBI Bank, in his message to the shareholders, observed that it is inevitable that the year ahead will be peppered with challenges stemming from wavering confidence among businesses as well as consumers as also sputtering momentum of economic activities.
“A health emergency of this magnitude has demanded extraordinary responses and outcomes from all the affected population, businesses as well as policymakers. Under these circumstances, the Bank remains committed to being with its customers and ensuring seamless delivery of financial services and will participate in the relief measures to mitigate the impact of the crisis,” Kumar said.
He underscored that IDBI Bank is cognisant of the elevated risks in the operating environment and will take steps to remain strong and resilient and be well-positioned to absorb potential losses that could arise.
Meanwhile, referring to the Government’s directive of rationalisation of overseas operations, IDBI Bank said it is undertaking necessary steps.
IDBI Bank has one overseas branch at Dubai International Financial Centre (DIFC). It has completed 11 years of operations.