Indian Bank crossed the annual net profit milestone of Rs 10,000 crore for the first time in FY25. In an interaction with Narayanan V, managing director and CEO Binod Kumar discusses the credit and deposit growth plans for the current fiscal, the guidance for net interest margin (NIM) and recovery strategy. Excerpts:
What’s your NIM guidance for FY26?
The domestic NIM declined sequentially to 3.48% for the March quarter from 3.57%. On an annual basis, it dropped to 3.51% from 3.54% in FY24. I believe there will be further pressure on NIMs as deposit rates remain elevated. Even after a 50-basis-point repo rate cut, only two-three banks have reduced peak deposit rates. So, most deposit accretion is still happening at rates of around 7.25-7.30%, which continues to put pressure on the cost of deposits.
With more rate cuts being expected, NIMs will likely moderate. That’s why I’ve revised our FY26 NIM guidance to 3.15–3.20%. However, NIM should improve once the gap between current account, savings account (CASA) and fixed deposit rates narrows. For instance, fixed deposit rates are still around 7.1%. As this differential comes down, the cost of deposits will also start easing.
What are your fundraising plans for FY26?
All banks are exploring options beyond deposits to raise funds. Last year, we raised Rs 10,000 crore through infrastructure bonds. For this year, our board has approved a capital-raising plan of Rs 12,000 crore. This includes Rs 5,000 crore of equity capital, Rs 2,000 crore through Basel III-compliant AT-1 perpetual bonds or Tier-2 bonds, and Rs 5,000 crore via infrastructure bonds. That said, we will tap the market at an opportune time. Our CRAR (capital to risk-weighted assets ratio) currently stands at a healthy 17.94%.
What’s your plan to tap low-cost deposits?
Attracting low-cost deposits depends on two key factors: Customer convenience and operational efficiency. Improving customer services across our branch network is our top priority. We’re also planning several products. For instance, we intend to launch a dedicated senior citizen-only branch, starting in Chennai and then expanding to other regions, to tap deposits from that segment.
Salary accounts are another focus area. We have 13 MoUs for salary account tie-ups, through which we’ve opened 40,000 accounts. For current account customers, add-on services like MIS are increasingly expected. Our in-house IT team, along with fintech partnerships, is developing solutions tailored to this segment.
After the State Bank of India, we have the highest number of QR codes issued, but many are yet to be activated. Our immediate focus is to activate these QR codes for current account customers. Even if they maintain Rs 1,000, Rs 2,000 or Rs 10,000, it improves our float. So, we’re working aggressively on this front.
What’s your credit growth target for the year?
We are targeting a 10–12% growth in advances this fiscal while deposits should grow at 8–10%.
On the advances side, housing and mortgage loans will be the key focus areas. We are also adopting a cluster-based approach — focusing on hubs like the textile cluster in Tiruppur, steel clusters, and the tiles and ceramics clusters, etc. Even with presence in select pockets, we can do substantial business within each cluster. We launched this strategy in April and are targeting Rs 2,000 crore in business from it. Supply chain financing is another major focus. We’ve garnered Rs 1,300 crore of business in just one year since starting. Our MSME loan book grew 12% in the latest quarter, and we aim to maintain that momentum.
What is your recovery target for FY26?
Last year, we achieved recovery of Rs 7,651 crore. We have set a recovery target of Rs 5,500–Rs 6,500 crore for this year. Recoveries depend on how much pressure you apply and how effectively you bring borrowers to the negotiating table — through the National Company Law Tribunal, debt recovery tribunal, or one-time settlement (OTS) mechanisms.
Under OTS, if a property is put up for auction without taking physical possession, chances of a sale are lower. So, we are actively focusing on taking physical possession to improve recovery outcomes.
Interestingly, a large part of our recovery last year came from smaller accounts. Of the Rs 7,651 crore recovered, nearly Rs 6,700 crore came from accounts with exposure of less than Rs 1 crore. These smaller accounts tend to have higher recovery percentages, unlike larger ones, where haircuts are steeper. So, we are concentrating more on recovering dues from small accounts.