The Hindu Business Line : South Indian Bank to foray into retail market

THE Thrissur-based South Indian Bank plans to draw up a well-formulated action plan to enter into the retail market in a big way during the current year.

Talking to Business Line, Mr A. Sethumadhavan, Chairman, said that the bank would have an understanding with some major corporates of the country so that their employees could access the bank for all forms of retail credit. The bank would also be coming out with a slew of new products towards this end. To facilitate this process, the bank has already set up a product development and marketing cell at its headquarters.

However, Mr Sethumadhavan conceded that with almost all the banks in the industry focusing on retail credit, the market has become crowded and rate under-cutting has become more the norm rather than the exception. With a crowded market, the rules have often been given the go by and loans at nominal rates for specific purposes have often been deployed for unproductive means.

Both the problems, the rate under-cutting and deployment of credit for purposes other than those for which it is extended can be greatly curtailed by entering into tie-ups with these corporates, he said.

The rates of interest would be market driven and competitive while the services exemplary. There is no way the bank can be lax in its services because it is the accounts of a large number of employees that is in question and not just that of one individual account.

Regarding last year's performance, Mr Sethumadhavan said that he was quite satisfied. The time for consolidation of the bank was over and now what it should look forward to is a phase of sustained growth, he added.

But he conceded that the present pace of growth can be sustained only in the falling interest rate regime. The margins are already under pressure and the competition in all sectors, be it retail or corporate lending is phenomenal, further driving the margins down.

With the dollar-rupee parity becoming more realistic in recent months, the falling interest rate regime might bottom out in the not too distant future. When the current rate regime bottoms out, Mr Sethumadhavan said that non-interest income and more specifically income from treasury operations of banks could dip sharply.

That is why South Indian Bank has not dipped into its quality assets to show greater profits in the recent past. "We have not diluted the quality of our high yielding investments," Mr Sethumadhavan said. As a result, the banks treasury income to total income has not shown any significant growth during last year. The average yield on investments also registered a modest fall.

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