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Opportunities With MSMEs Are Huge: Murali Natarajan

Murali Natarajan, MD & CEO, DCB Bank, speaks to BW Businessworld on issues ranging from NPAs to the bank’s future plans. Excerpts:

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On DCB Bank’s expansion spree
We were steadily growing branches till October 2015 followed by a programme where we decided to double the growth from 160 to over 320 branches in two years. The branch expansion programme came to an end in October 2017. Since then, our plan has been to launch 1517 branches every year. The branches that we have established in an accelerated manner have started to give results now. So last year, we improved our cost income ratio quarter on quarter. We also improved our return on asset and the overall equity in addition to growing our loan book by 21 per cent if you exclude the corporate loan book. Clearly, the benefits of branch expansion are accruing and that is where we have the next area of focus.
On whether the last quarter results are sustainable
We have always targeted to double the balance sheet in four years. We are focused on MSME and SME as the core segment whether it’s mortgages, loan against property, commercial vehicles or work in capital. We are talking about self-employed group as our core segment of which salaried are a very small component.

In any country, MSMEs and SMEs are at the heart of employment generation. It may look like a risky segment but the opportunity for a bank like us is huge. I believe we should be focused on doubling our balance sheet in three to four years.

As for cost income ratio we believe it will steadily come down to 50 per cent while improving our return on assets and return on equity. Overall, I believe it is sustainable.

Self-employed is a risky category but if you compare recoveries in the corporate segment with that in the MSME segment, the latter fares far better. Usually, we are the sole banker for all the SMEs in this country. We take self-occupied residential or commercial property as a collateral. Our average ticket size is Rs 40-50 lakh and most of our loans are below Rs 3 crore. Even when a customer gets in a bit of difficulty we usually avoid taking their property and try to work with them.

Ultimately, we want our customers to survive and their business to grow. We have more than 500 employees in the loan recovery team. If a customer can’t pay Rs 1 lakh per month, we try and flex his loan payments to Rs 30,000 per month. SMEs are affected not just by the economy but also by natural disasters and family disputes. The health of the SME owner can be a problem too because sometimes they are the sole runners of the company. While the segment is risky, the recently formed analytics wing looks at different risk areas before advising our sales teams to take decisions on various segments.
On DCB Bank in the next five years
We travelled through difficult times initially but now the bank has created a place for itself in the industry, although our balance sheet is small. We feel that it is our responsibility to take the bank to a bigger level and make sure everyone see us as a well-respected bank.

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