Development Credit Bank is firmly back on growth trajectory

Development Credit Bank may be a smaller player in terms of size of operations, but it has been in the business longer enough than most of its peers, with its history dating back to the pre-Independence era. The bank, which was severely impacted by the global recession a few years ago, is showing signs of a turnaround. Murali Natrajan, managing director and CEO,
tells Megha Mandavia his plans to cautiously expand the balancesheet by 25% every year and penetrate deeper into the country. Edited excerpts:

DCB Bank currently has 94 branches,mostly in the western part of India. What is the bank’s branch expansion strategy?
We are predominantly in Maharashtra, Gujarat and Andhra Pradesh, which account for about 60-70% of our branches. Our strategy now is to largely expand in tier 2 to tier 6 cities. The reason is that since we are a small bank, we can better connect with the target market, and also economically speaking, from a cost to income perspective, it’s better to focus on tier 2 to tier 6 cities, where there are a lot of opportunities.

We realised this after we put a few branches in these places in the last 12-18 months and saw that performance of those branches. Our plan for expansion is that every year from now, we want to add at least 30-40 branches, and most of them would be in tier 2 to tier 6.

How does this help your loan book and deposit growth?
As we expand our branch network to tier 2 to tier 6 cities, it will help our agriculture and inclusive banking book grow 20-25% at least for the next 2-3 years. It will also help us boost retail deposits.

Do you see any risk on your gold loan portfolio? Do you plan to reduce the loan amount to the value of gold ratio?
We have about Rs 60 crore of exposure in gold, which is less than 1% of the total loan book. Our loan-to-value (LTV) ratio is 60-70%. We always adjust the price of gold downwards to make sure we don’t lend more. We avoid doing large ticket gold loans. We are not planning to reduce LTV ratio right now.

What kind of growth do you see on the corporate loan book as well as from small- and medium-sized enterprises?
Four years ago, we had decided that we need to de-risk our corporate book. We decided to have a lot more secured kind of a loan portfolio. As a result, for 2-3 years, we kept pruning our corporate book. We exited almost Rs400 crore in 2011-12. Then, we started rebuilding the corporate book. This year, we had a growth of 30% from a small base. Our idea is to cautiously approach the corporate book, and grow it about 20-25% every year for at least next 2 years.

Your SME segment growth slowed to 6% this year. How much growth should we expect in this segment?
Last year what we found was that there are some challenges in this segment. We reshaped and adjusted our credit criteria so that we take lesser exposure per customer. We were doing Rs 6-7 crore per customer, we reduced it to Rs 2-3 crore. We expect the whole reshaping exercise to take another 6 months, following which we will start to grow the book 20-25%.

Our main focus is the self-employed segment. They have current account-savings accounts needs, home loan and loan against property needs. They also have working capital needs.

What are your targets for this financial year?
Our aim is to grow the balance sheet by 25% every year, grow advances by 20-25% and deposit by 25%. Given the current momentum, we should be able to achieve it.