Mangaluru-based Karnataka Bank embarked on the challenges created by the Covid pandemic last year and earned a net profit of 451.20 ₹ crore in the first nine months of 2020-21, compared to a profit of 1,431.78 re crore for the entire 2019-2020 .
In an interview with BusinessLine, Mahabaleshwara MS, dr. Med. And the bank’s chief executive, highlighted strategies that helped the bank achieve better performance, and its plans for the current fiscal year amid a second wave of Covid. Excerpts from the interview:
India is witnessing the second wave of Covid. How does your bank plan to deal with this fresh challenge?
The first half of the last fiscal budget was spent on understanding and fighting the pandemic, while work was muted and there was no clear picture of the Covid pavidemic. Our innovative business principle “save, consolidate and become stronger” has helped us immensely to resolve the aforementioned crisis situation and to come out with a satisfactory number. But now the situation is different. At least now we have a year of experience navigating through a pandemic and that’s a big advantage.
In order to overcome Covid wave 2.0, as in the previous fiscal period, our bank will continue to apply the principle of “preserve, consolidate and become stronger”, together with the necessary measures to reduce costs. We will continue to be cautious and conservative. We will focus on economic portfolio development, concentrating more on CASA and cheap retail time deposits, in addition to developing a healthy asset portfolio that is largely protected from the long-term adverse effects of the pandemic to address the economic challenges associated with the Covid wave 2.0 .
In your recent letter to shareholders, it is mentioned that the bank is aiming for “moderate” growth of 12 percent for the period 2021-22. What are the reasons for this moderate perspective?
Yes. The bank has set a moderate growth target of 12 percent for business turnover for the current fiscal year. Given Covid’s second wave affecting a country with a huge impact on health and business in the short to medium term, we expect growth challenges in key sectors during the first half of this year. Although MSMEs and the agricultural sector are less affected, which are major components of the growth of our retail credit books, the entire ecosystem of the economy is already shocked and may need enough time to get out of it if there are no more waves Covid is moving forward.
We also expect customers to be conservative in investing in new or large projects or expanding their business. Our focus will be on preserving, maintaining the quality of assets and its stable growth during this fiscal period. However, the bank will always be ready to catch up at any stage of the economic recovery, surpassing its own level of guidance. We have a state-of-the-art travel infrastructure for digital loans and we are in a better position to cash in on such opportunities at a glance at an economic turnaround.
Do you think the new Covid wave will lead to an increase in NPA in the coming days? If yes, how do you plan to solve it?
Although the economic impact of the second wave of the Covid pandemic and related locking, etc. It has only just begun to develop, no one can take it lightly and it may be too early to predict the impact. The banking industry in India has fully demonstrated its resilience and managed to face the challenges posed by the first wave of Covid, mainly due to ‘economic vaccines’ in the form of regulatory packages such as moratoriums, OTR / MSME restructuring, emergency loans Line guarantee scheme, simple interest charges during the moratorium, etc. Announced by the Government / Reserve Bank of India.
By opting for the aforementioned “economic vaccines”, the borrowers managed their cash flow with an extended loan term. However, now the country is in a better position with all its population in the age group of 18 and more ready for vaccines. Further, borrowers have also reorganized their business and become more agile. However, recovery and recovery are also expected to take longer than expected. The RBI also recently announced a ‘stimulus dose’ with various relief measures for both bankers and individual borrowers, small borrowers and MSMEs. This is expected to give the necessary impetus to the economy. Therefore, the response to Covid 2.0 and beyond should be collective, comprehensive, determined, and long-lasting, in addition to looking to the future.
Following the current trend (until most of India is vaccinated), Covid waves are likely to recur at regular intervals. How does your bank plan to address this?
The good news is that the government has allowed people over the age of 18 to be vaccinated. With vaccination initiatives, and also with creating greater public awareness about it, he hopes that the maximum number of people will be vaccinated in about two to three months, given the current progress. It is expected that when herd immunity develops, the Covid wave will also decrease significantly. Like previous fiscal accounts, our bank would continue to be prudent in lending and ensure the addition of useful and quality assets, in addition to focusing on a lower-cost portfolio. Necessary steps will be taken to protect the interests of all our stakeholders. With strong fundamentals and an improved capital adequacy ratio, we are confident that we will sail without problems this year, despite unforeseen challenges.
Like previous economic shocks like the global recession, the global financial crisis 2007-08. Years, and this time the Indian banking sector, I am sure, will withstand the challenges and come out with big colors. We will stick firmly to the government, the RBI and customers.