Indian Overseas Bank Raises Lending Target For Home, MSME Loans
Signage for Indian Overseas Bank is displayed outside an automated teller machine (ATM) branch in Ooty, Tamil Nadu, India. (Photographer: Dhiraj Singh/Bloomberg)

Indian Overseas Bank Raises Lending Target For Home, MSME Loans

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Indian Overseas Bank Ltd. will enhance lending to micro, small and medium enterprises as well as give out more home loans, its Chief Executive Officer Karnam Sekar said and expressed hope that the bank will turn profitable soon.

"We have devised a formula-based plan so that our recovery position is further improved. Our focus on recovery is yielding good results but our target would be on growing MSME and retail portfolios," Sekar told in an interview here.

The public sector bank, which is under the RBI's prompt corrective action currently and has been incurring losses for the past 18 quarters, posted large losses because of huge non-performing assets for the past 7-8 years, caused mainly on account of large exposure in the corporate sector, he said.

Sekar added that the bank made the required provisioning. As a result, net NPAs (as a percentage of total advances) as on December 2019 has come down below 6 percent and that is a criterion to bring the bank out of the PCA, he said.

"So, this quarter onwards, not only this quarter but also for the coming quarters, we are likely to make profits," Sekar said.

"In the MSME segment, we are right now in the range of Rs 31,000 crore lending portfolio, we want to grow that portfolio to Rs 50,000 crore in the medium term of 2-2.5 years. Similarly, in home loans, we are at Rs 13,000 crore level right now and we want to make it to at least Rs 25,000 crore in the similar time frame," he said.

While the average ticket size for the retail home loan segment is targeted to be raised to Rs 25-40 lakh from the existing Rs 20 lakh, there will be special focus on growing MSME loans by targeting textile, automobile and small industries, he added.

"With reduction in TAT (turnaround time) and improvement in service, we have good demand for our limited growth. In MSMEs, we have 250 branches with specialised people. We have trained almost 700-800 people and put them in these branches, they will focus mostly on MSMEs,” Sekar said.

He said the bank has a focussed approach especially in few clusters like Tirupur and Coimbatore in Tamil Nadu where there are some industries, specifically engineering, automobile and textile.

Detailing about the bank's stepped up the recovery process, he said the bank has put in place a robust mechanism and created asset recovery branches.

"We have created asset recovery branches, we have identified 16 such branches and these NPA accounts have been shifted there. These are being directly controlled from the central office," Sekar said.

Apart from that, IOB has also started to auction the pledged properties to recover its outstanding.

We have identified more than 8,000 properties. We have been doing this on a monthly basis from July (2019) onwards, every month we go for mega e-auction. And, in this, we are seeing some good amount of success
Karnam Sekar, Chief Executive Officer, Indian Overseas Bank

He said the bank has also deployed a scheme for one-time settlement, where loans up to Rs 25 crore are eligible. Earlier, the loan amount under this was Rs 3 crore.

Also read: Recoveries Via IBC Fall To Lowest In 10 Quarters, Number Of Cases Spike

While the gross NPAs have been brought down to 17.12 percent at the end of December 2019 as compared with 23.76 percent a year ago, the net NPA ratio improved to 5.81 percent, which is less than 6 percent prescribed by the Reserve Bank of India.

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