Public sector Dena Bank has slashed deposit rates by 50 basis points on its Dena Diamond deposit scheme from 9.5% to 9%.
MUMBAI: Public sector Dena Bank has slashed deposit rates by 50 basis points on its Dena Diamond deposit scheme from 9.5% to 9%.
“To protect our margins, we decided to make this move. We would not like our net interest margins (NIMs) dropping below 3%,” said P L Gairola, the bank’s chairman and managing director. Dena’s NIM was 3.11% for the quarter ended June 2007.
Gairola does not see interest rates softening anytime soon. “Credit growth is on a slide now because the slack season is on for banks. Within the next 1-2 months, we’ll see credit growth picking up and interest rates may rise again,” Gairola said.
As part of its preparations for meeting Basel II norms, Dena Bank on Monday tied up with Crisil and CARE for the ratings of the bank’s potential clients (corporates and SMEs). The deadline for Basel II implementation for the bank is March 2009, as the bank doesn’t have its presence abroad. “There is still a lot of time. But we are getting set from now itself,” Gairola said.
He added that Rs 140 crore has been sucked out from Dena Bank owing to RBI’s move to hike the cash reserve ratio (CRR) by 50 basis points to 7%. The bank is likely to incur Rs 9 crore interest losses in the current fiscal year due to this move.
Gairola is targeting to keep the bank’s net NPAs under 1% for the year. “Our NPAs were as high as 25%, 3-4 years ago, which have now slid to 2.07%. We would like to get it down to less than 1% with our speedy recovery process,” said Gairola. The bank sold NPAs worth Rs 404 crore last year.
In order to fuel growth and maintain the capital adequacy ratio Dena Bank plans to raise Rs 250-300 crore this year by way of upper Tier-II capital. “We will raise this money by way of fresh subordinate debt. We do not choose to go through the equity route,” said Gairola. The capital adequacy ratio of the bank stands at 11.90% as on June 2007.
Dena Bank is also looking forward to enter the credit card and insurance business during the year. “Right now, our credit card base is low. Hence, we plan to tie-up with SBI Cards for co-branded cards,” Gairola said.
Gairola rubbished rumours of Canara Bank taking over Dena Bank. “There is no merger happening. Canara Bank has not approached us, neither have we approached them,” he said.
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