“Fintech partnership in focus; NIM may draw into FY24′
IDBI Bank aims to form partnerships with fintechs for digital loans, connected banking and new banking services. Suresh Khatanhar, deputy managing director, tells Piyush Shukla that the lender aims to maintain high year-on-year (YoY) youth loan growth and 5% YoY deposit growth in the next financial year. However, with deposit rates continuing to rise, the net interest margin (NIM) is likely to narrow from 4.59% during October-December to 3.50% – 3.75% in the next financial year. Excerpt:
What is your guidance for loan and deposit growth for FY24?
The current macroeconomic environment is characterized by uncertainty linked to factors such as the future path of inflation and interest rate cuts, as these can have an impact on progress and deposit growth. We are in the process of finalizing the plans and growth is expected to be sustained.
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What is your view on asset quality for the next financial year?
Asset quality is expected to improve further. Our GNPA will also depend on the transfer of large assets to the National Asset Reconstruction Company (NARCL), but with a high provision coverage ratio, net non-performing assets are expected to be below 1.25%.
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Will you continue to manage NIM above 4.5% next financial year or expect decline?
The current regime of NIM is supported by the lagged effect of a rise in repo rates and disposable income streams. With higher deposit rates, the same will stabilize and may consequently affect NIM to a certain extent. However, we target NIM in the range of 3.50-3.75% for FY24.
What is the update on privatization? Can we expect the exercise to be completed by the end of FY24?
The divestment process is handled at DIPAM level. It is already in the public domain that it has shown a good response during the expression of interest process. However, at our level, we are committed to improving the top line and bottom line on a sustainable basis and increased balance sheet resilience to generate value for all stakeholders.
What is the target for co-lending and securitization for the next financial year?
As part of its customer acquisition strategy, the bank collaborates with tested market players who have proven business models and expands its footprint through such tie-ups. So far, the bank has already entered into tie-ups with six NBFCs. As far as securitization is concerned, the same is used to achieve regulatory targets under specific segment under priority sector lending book. The bank has a specialized vertical, which assesses the requirements. We aim to achieve approximately Rs 200 crore during FY24.
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Are there fintech partnerships in the pipeline?
The bank has progressed well in partnerships with fintechs, both for capacity building as well as for distribution partnerships. So far, the bank has on board fintechs in lending, credit cards, customer acquisition, fixed tag, CMS, AI/ML and remittances. We aim to tie up with several fintechs in the areas of digital lending, connected banking, neo banking etc. in the next financial year.
Do you want to raise capital in FY24?
We maintain CRAR (capital adequacy ratio) of 20% including tier 1 capital of 17.60% and there is scope to increase our capital through AT1 bonds (additional tier-I). So our current capital structure is sufficient to sustain the growth momentum for at least the next two years. However, we will continue to evaluate market dynamics to raise capital.
