What is the outlook when it comes to overall advances growth in terms of any sort of projections or any particular space where you have seen a little bit of weak growth when it comes to your advances?
Baldev Prakash: As far as advances growth is concerned, our guidance was around 15% to 17% and we are confident of maintaining the guidance. This quarter also, on the net advances basis, it should be 15% plus.
What about the pockets in which you can grow? Can you highlight that for us a little bit more about what are going to be some of the pockets when it comes to your advances that are likely to shape up well from here on?
Baldev Prakash: Retail growth is coming from our home territory, that is Jammu and Kashmir and Ladakh. And in retail also, the home loan segment is picking up. We are clocking a growth of over 20% in home loans and corporate growth is coming from the rest of the country segments, basically all the good corporates. That is the strategy we followed last year and we continue with that study.
What is your outlook on deposit growth? Are you seeing any challenges when it comes to retail term deposits? Recently, we have had a lot of players like SBI, for instance, increasing their term deposit rates. Is this a trend that you are expecting for the bank as well?
Baldev Prakash: As far as the growth in retail deposits is concerned, we do not find much challenge. Our CASA has been maintained over 50% and on a consistent basis, it has been above 50%. Yes, the cost of deposit will be a little higher, a little elevated. Maybe for another six months or so, it should remain a little elevated and then finally settle down.
What about your asset quality? How do you assess it so far and do you think there is stress building up, specifically when the regulator is also showing concern and being cautious?
Baldev Prakash: Yes, asset quality has been the biggest success story of the bank. If you see the numbers in the last two years, one-and-a-half years, you will see that consistently on a quarter-on-quarter basis, we have not only achieved our guidance, but surpassed that. As of today, we are already below 5% and our guidance is 4.5% on gross NPA. We are very confident that we will be meeting our guidance of gross NPA and our net NPA is already below 1%.
So, we do not find any stress building up because the selection of borrowers from the angle of the quality of advances has been top class for us.
We have seen some uptick in the cost of deposits for most of the banks actually and NIMs as well have been stabilising a bit if you were to look at the Q2 numbers or how the Q3 updates have been. What is the situation at your bank and are you placing yourself to absorb the cost of any of the deposits?
Baldev Prakash: Yes, CASA remains the strength for the bank, but of course, as far as term deposit is concerned, we have to align our deposit rates with the competition. From that point of view, a slightly elevated cost of deposits is expected and it should remain in this territory for another six months or so. But that is not a cause of concern for us because we are maintaining our NIMs in the guidance which we have given in the beginning of the year.Much of your current business is coming from J&K. While this is an advantage, it also means that beyond a point you will struggle with your growth.
Baldev Prakash: Yes, J&K story is just opening up and the type of activities which we are seeing in Jammu and Kashmir, of course, led by the inflow of the tourism, we are quite hopeful that the growth will be led by J&K and the type of strength the bank is having in Jammu and Kashmir I am very confident that we will be the first choice as far as bank is concerned for the customers.
As far as our rest of India operations are concerned, we are there for the last one, one-and-a-half years. We are quite an active player as far as corporate banking is concerned and we will continue to maintain our dominant positions and this year we will be supporting our rest of the country’s operations with the good home loan growth also.
Specific in terms of the split then, let us say how much of the total future business in FY25 will come from J&K and non-J&K?
Baldev Prakash: As of now, we are maintaining around 67-68% from J&K and the rest around 33% from the rest of the country. This business mix we are likely to maintain in the coming years also.
You had advantage because no large banks essentially came to J&K for historical factors. I am not getting into why but that was an advantage. Now competition is there. UPI has kicked in, transfers are easy, internet connectivity is great. Could your J&K business come under threat because of new banks coming there?
Baldev Prakash: Let me reply in two parts. As far as deposit is concerned, yes, likely to have some competition, particularly in the term deposit segment and yes, because of that, our cost of deposits may be a little elevated. But as far as the loans are concerned, I am very confident in the type of support system we are having on the ground and the connection with the local population. We do not find much challenge as far as the loan growth is concerned in J&K.
What is the update in terms of the utilisation or progress of the Rs 750 crore via QIP? Are you looking to expand in other regions? What kind of investment will this yield?
Baldev Prakash: This is purely the growth capital and I am very happy to tell you that the type of response we got in the QIP is phenomenal. It is unprecedented. So, this entire money we will be utilising for our growth and that will be led by the retail in our home territory and corporate in the rest of the country.
What about the outlook then? The wage rate hike came out at about 17%. How is the bank placed for wage rate hikes?
Baldev Prakash: We are expecting an absolutely soft landing there. We were maintaining a provision of around 15%. It is in the range of 15% or 17%. So, we do not find much challenge there because already the substantial amount has been provided for.
Any bank has three models. One, you get money because of a transaction, which UPI has taken over. Second is fee-based income and third is money which you will get largely because of lending to corporates and term loans and home loans. How are you likely to grow your fee-based income?
Baldev Prakash: I would like to tell you that as far as the UPI transactions are concerned, I would request you to come and see the market in Srinagar. You will find the Jammu and Kashmir Bank UPI with a lot of small vendors and shops as well. We are quite hopeful that we will continue maintaining our dominance in the UPI segment as far as the payments are concerned. Yes, some competition will be there, but we are quite prepared for that.
As far as the other fee income is concerned, our strategic move to shift treasury operations from Srinagar to Mumbai is now paying the dividends. We have already engaged one of the big fours for consultancy as far as our income from treasury in all the products is concerned and that should be seen in a few months now and we are confident that the treasury of the bank will also be another profit centre.
How are you utilising that Rs 750 crore that you raised via QIP? What is the progression like?
Baldev Prakash: This will be used mainly in the growth in corporate as well as the retail segments and the type of growth which we are seeing in our home territory we were in the need of this capital. I think it has come at the right time. And going forward, we are expecting our rating to go up and then the amount in case we require in future, we will be raising through bonds and which will come at a cheaper rate to us.