‘RBI should cut CRR by at least 25 bps’

After home loans, auto loans and educational loans, now there is a new offering called tuition fee loans that banks are launching. Ramnath Pradeep, who took over as the chairman and managing director of Corporation Bank few months ago, is all set to launch it in his bank.

This product was Pradeep’s brainchild when he was an executive director in Central Bank of India. Central Bank of India was the first bank to launch this type of loan last month. Pradeep shares his bank’s plans in an interview with DNA. Excerpts:

You have been in the banking industry for several years now, what innovations have you identified and are waiting to launch?
We have plans to launch a tuition fee product, which was my brainchild in Central Bank of India. Under this, we give loans to students to pay the tuition fee. Students, these days, go for various competitive exams, so this will be a boon for them. This product will help students, who are unable to secure admission in the best tuition classes. We are introducing it in another 10 to 15 days. We are charging an interest rate of 11% for loans up to Rs2,00,000. We are the second bank to launch this. Central Bank of India also has a similar scheme. It was introduced after I left the bank. Central Bank of India introduced it last month.

Your bank has signed a memorandum of understanding (MoU) with United India Insurance Company for non-life insurance products. Can you tell us more about your plans on the insurance venture?
This is a normal MoU that all banks signed and we are a part of it too. We are selling their general insurance products. We have not yet planned to come up with our own insurance products, but are thinking along those lines also. We are yet to judge the viability of that. If it does happen, it will be non-life insurance, because we are already married to LIC for life-insurance.

As far as deposit growth is concerned, banks are still not able to mobilise enough deposits from people. Do you think the Reserve Bank of India will revise its deposit growth target?
The question is what your source of deposit is. Your source of deposits is households. Households have other opportunities such as the capital market and in gold. As the rate of interest in bank deposits was low, it was not giving sufficient yield. Now the capital market has become a little jittery, so people will start putting money in bank fixed deposits.

What are your expectations from the mid-quarter review of monetary policy for 2010-11 on December 16?
We are expecting a rate cut may be in the cash reserve ratio (CRR). In order to ease the liquidity, I feel the RBI will take this step. I personally feel the RBI should cut CRR by at least 25 basis points (bps). Now it is upto the RBI to decide.

What are your fund raising plans for the rest of this fiscal?
I do not need money right now, we will raise when required. The government has already given money to a few banks and we are one of them. We have headroom of `1,800 crore for tier-II capital. But we are not raising that money, because rates are too high and I cannot afford. Besides, I do not need that money right now.

What are your international expansion plans?
We have requested the regulator to give us permission to open our first international branch in Hong Kong. My application is pending with the regulator. We opted for Hong Kong, because that is a country where all currencies are dealt and it is also close to China. From there we can get good business from Indian origin companies, who are planning to expand in China or Malaysia.