Banking system is in a Catch-22 situation: Indian Bank's Padmaja Chunduru

Indian Bank has 450,000 MSME customers who are eligible for loans guaranteed by the government.

The Indian banking system is in a Catch-22 situation — balancing between credit growth and bad loans, said Padmaja Chunduru, managing director (MD) and chief executive officer (CEO) of Indian Bank.

Chunduru was speaking at a webinar organised by the Indian Chamber of Commerce (ICC) on quantitative easing and credit risk. “Banks are in a Catch-22 situation. If banks don’t give credit, there is a risk of failure of organisations. If banks lend too much, lending might take a hit on the balance sheet. Credit quality is a constraint, and we have to look at ways to assess risks in an uncertain environment,” she said.

However, the immediate concern for bankers was to manage the present situation, she added. Indian Bank has 450,000 MSME customers who are eligible for loans guaranteed by the government.

Chunduru’s views were echoed by Chandra Shekhar Ghosh, MD and CEO of Bandhan Bank. Banks are in a challenging spot as they need to balance credit growth with non-performing assets, he said. “Banks are in a very critical situation as on one hand they are required to assess the credit worthiness of customers, while on the other hand they have to balance it with credit growth.”

Credit growth should start picking up in the second quarter, said Ghosh. But, the biggest challenge would be to give credit to small enterprises which do not have any credit ratings.

While the schemes announced by the government to help the MSME sector are good in intent, the key lies in administering the same, said Rajesh Kumar, MD and CEO, TransUnion Cibil.

“There needs to be a tight monitoring mechanism for assessing MSME's cash flows and production cycles. We have created a Cibil MSME rank to provide risk differentiation," he said.

State Bank of India completes promotion exercise, elevates 14 to Dy MD

Given the extended lockdown, the bank extensively used its digital platform, including video conferencing, to carry out the performance review and promotion exercise

State Bank of India has completed the promotion exercise at the top and senior management levels, and elevated 14 chief managers as deputy managing directors (DMDs). The lender has also elevated 30 general managers as chief general managers.

Given the extended lockdown, the bank extensively used its digital platform, including video conferencing, to carry out the performance review and promotion exercise, said senior bank executives.

New faces at the DMD level include Arun Mehta, who is heading SBI Capital Markets; Vinay Tonse, Prabodh Parikh, Natrajan Sundar, A K Tiwari, S Salee, Rana Ashutosh Kumar Singh and Saloni Narayan. The process of their appointments is underway.

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The number of people elevated to the DMD post was higher this year, as many bankers at this level moved to head other public sector banks. Some of them were Padmaja Chunduru, as managing director of Indian Bank, Mrutunjaya Mahapatra as head of Syndicate Bank (now merged with Canara Bank), and Pallab Mahapatra, as MD and CEO of Central Bank of India.

Prashant Kumar, chief financial officer, moved to YES Bank as MD and CEO as part of the plan to salvage the ailing private bank. Further, there are many retirements scheduled in the current financial year, bankers said.

At the level below the CGM’s post, the bank promoted over 60 to the post of general manager, and over 140 as deputy general managers

Indian Bank sees new opportunities with larger footprint after merger

Both the banks have come together amid the coronavirus (Covid-19) lockdown and started working as a single bank with a larger footprint.

After the merger of Allahabad Bank with it, Indian Bank sees growth in lending and deposits and new opportunities emerging despite the lockdown, according to Padmaja Chunduru, Managing Director & CEO of Indian Bank. Both the banks have come together amid the coronavirus (Covid-19) lockdown and started working as a single bank with a larger footprint.

Even during the lockdown period, both lending and deposits are growing. "We must be careful in assessing and giving the loans. We have been one of the earliest banks to announce emergency loans across the table. I think this opens up new opportunities. First of all we have to assess the risks because there are so many more sectors now and the whole paradigm is shifting," Chunduru said.

The merger was a big task in front of the bank, but when confronted with the Covid-19 issue, the whole bank came together and the safety of the employees became paramount. Safety measures have been implemented across the bank. On April 24, it was Allahabad Bank's Foundation Day, but the amalgamated entity could not celebrate due to the lock-down.

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The bank has also launched an online learning management solution for the staff. The best the welfare measures that were offered by the two banks have been made applicable to all the employees and all of them have been well received. In terms of alignment of products of both the banks, especially those related to housing loans, Indian Bank had certain products which were more attractive to the customers and they were launched across the country.

Banks extending emergency loans to salaried, entrepreneurs after rate cut

However, most are extending it to their existing customers only.

With the Reserve Bank of India cutting benchmark rates sharply and also allowing banks to defer EMIs, banks are slowing gearing up to lend to various sectors, including the salaried and entrepreneurs. And with the loss/fall in income, and even jobs coming under threat, there would be many who would be seeking such loans to navigate through these tough times. Adhil Shetty, CEO, Bankbazaar.com, says: “With pandemic-related job losses and the possibility of a recession looming, banks are worried the default rate on unsecured loans could skyrocket. Despite this, many have indicated their willingness to help with special emergency loans.”

For the salaried: Padmaja Chunduru, managing director, Indian Bank, says: “We have launched products across categories, not just for corporate, or MSME, but even emergency salary loans, loans for pensioners and self-help groups.” The bank’s retail salary loan is called IND-COV Emergency Salary Loan. Under this scheme, you can avail of a loan up to an amount equivalent to 20 times your latest monthly gross salary up to Rs 2 lakh. To be eligible for the loan, you need to have a salary account with the bank. In case you are a home loan borrower of the bank, you can avail of this loan, even if you do not a salary account.

Adds Chunduru: “Even if you don’t have an existing banking relationship, you can avail the emergency salary loan, if you have a guarantor for the same.” A guarantor could either be your spouse or an employee belonging to your existing organisation. There is no processing fee. The interest being charged is 9.50 per cent for 36 months, including a holiday period of six months. Even Bank of India is extending loans to retail customers but in the form of a personal loan. The eligibility: Three times of last drawn salary up to Rs 5 lakh.