Ajit Venugopalan, MD, SVC Bank, reveals that in the next 5 years, the bank intends to double the growth in all the major parameters:
Ajit Venugopalan, MD, SVC Bank
Shamrao Vithal Cooperative Bank, better known as SVC Bank, was founded in 1906 and today it is present in 10 states – Maharashtra, Karnataka, Tamil Nadu, Telangana, Delhi, Rajasthan, Haryana, Goa, Gujarat and Madhya Pradesh. The bank offers personal, corporate and NRI banking.
Ajit Venugopalan, who assumed charge as MD in October 2017, is a CA and a veteran of the SVC Bank family. He has risen through the ranks and has worked in various branches and departments. Before taking up the new role, he was heading the corporate banking department of the bank.
Network Consolidation
SVC Bank has a total of 198 branches and 209 ATMs. In 2016-17, it added 5 branches and 14 ATMs. The business per employee increased to Rs9.40 crore as on 31 March 2017, registering a growth of 6.87% yoy. The number of employees as of H1, 2017-18 is 2547. Venugopalan says the current financial year will be a period of consolidation for the bank and there would be no additions to the number of branches or ATMs. The staff strength has decreased by 13 persons from the corresponding H1 period in FY 2016-17. The bank has hired about 25 persons in the current year with skills in areas of credit, finance, operations, marketing, risk, treasury, information technology and general branch banking.
Increasing Customer Base
The bank’s total customer base is approximately 9.50 lakh. It has always been in the forefront with respect to providing personalized services. “We plan to add around 1 lakh customers in the current financial year,” says Venugopalan.
The bank uses technology as a strategic business enabler to build a distinct competitive advantage and to achieve superior standards of customer service.
Business Growth, Prospects
SVC Bank’s total business as on 31 March 2017 was Rs 23,791 crore, with deposits of Rs 14,518 crore and advances of Rs 9273 crore. Of the total deposits, CASA deposits accounted for Rs 3546 crore and FDs Rs 10,972 crore. Of the total advances, wholesale loans were for Rs 8297 crore. The share of retail portfolio in the total credit had been 10%. Says Venugopalan: “Home loans as well as the top-up loans and vehicle loans are doing good this year. We are likely to achieve 30% yoy growth in retail loans in 2017-18. With aggressive efforts, the share of retail may increase to about 13%.”
The bank’s lending is picking up momentum in the second half of 2017-18. Traditionally, the bank has been more into financing of SMEs. According to Venugopalan, the major demand is from SMEs and mid corporates. Due to increased competition, all banks have witnessed pressure on their margins ad very few SMEs have taken up expansion plans in this financial year. “The Momentum is seen only in the second half and that too after November and the credit demand is likely to increase in Q4. We expect that the deposits will register a yoy growth of 4% to 5% and credit growth would be 9% to 10% by the end of this financial year,” he adds.
In 2007-08, the bank’s yoy growth was around 7% and in 9 years, it has grown by 4 times. Its CAGR had been around 20% between the years 2009-10 and 2013-14.
Venugopalan says the bank intends to grant loans in the next 12 months to sectors like textiles, chemical and engineering. The other sectors that would see increased funding from the bank are auto ancillaries, electrical equipment manufacturing units and paper and paper products.
He maintains that this focus is based on the broad industrial outlook. “The textile industry (including dyed and printed) attracted FDI worth $2.55 billion during April 2000 to June 2017. The Indian government has allowed 100% FDI in textile sector under the automatic route. The Indian textiles industry, currently estimated at $120 billion, is expected to reach $230 billion by 2020. The government of India has set target of textile and garment sector exports at $45 billion for 2017-18. The sector has witnessed a spurt in investment during the last 5 years,” says he.
He also cites a report of the Tata Strategic Management Group which has said the chemical industry in the country has the potential to grow from the current $155 billion to $346 billion by 2025.
Tech Progress
SVC Bank offers its in-house developed CBS, Genius’ to other, smaller cooperative banks on an ASP model as well as on a perpetual licensing model with the intention of enabling these banks to implement technology solutions. It is the only cooperative bank to have been licensed by RBI to sell software in its own name. “Our flagship product Genius is being re-architected and rebuilt using the latest technology to make it modular and an API ready banking solution for integrating easily and securely across all digital payment channels, third party applications for integrated solution including for supply chain management. We have sold the software to around 90 cooperative banks and credit societies. We have our own debit cards and we are exploring options to introduce our own credit card soon. We have an IT team of 90 people,” says Venugopalan.
The bank has invested significantly in digital banking solutions across various channels – like its own EFT switching for ATMs, IMPS, eCom and payment gateway. These solutions are largely used and tested by the bank for its own operations and then offered as ‘On Premises’ and Software as a Service (SaaS) offering to other banks. It has its own Tier-3 data center and a DR site with resilient connectivity between far and near DCs. Besides, there is an efficient BCP in place. Says Venugopalan: “The DR site and the recovery plan have been successfully tested for all third party hosted banks in line with the regulatory requirements. The technology stack is mostly from Microsoft with a mix of open source technologies. Our vendors include Microsoft, Oracle, Dell, IBM, HP, Cisco and NetApp.”
NPA CONTAINMENT
The bank’s gross NPAs have increased to Rs.355.59 crore in 2016-2017 from Rs.338.25 crore a year ago. GNPA as percentage to total loans was 3.83%. Venugopalan says the post-sanction monitoring department of the bank undertakes the task of monitoring and evaluating the loan book on a continuous basis on the parameters of pre / post disbursement compliances, overdue follow-up, systematic sequencing of activities such as execution of documents, creation of securities, registration of charges, analysing and reviewing operational data for detection of weaknesses and early warning signals to contain NPA for ensuring a healthy advances portfolio. The bank also strives to bring out qualitative improvements in credit administration.
Credit Appraisal
He also mentions about the introduction of various new processes for improvement of quality of credit appraisal. More emphasis is given to the current sectoral outlook in which the client operates in each credit appraisal. Personal information of the promoters with their qualifications and technical / sales expertise is also listed. “We also check the financial discipline of each new client including that of the group companies, whether the client is regular in depositing various statutory dues. We also offer internal / external training to our credit analysts,” says he.
Third Party Products
SVC Bank has tie-ups with many insurance and mutual fund companies. Among them are Bajaj Allianz Life Insurance, Exide Life Insurance, New India Assurance Company, Reliance General Insurance and HDFC Ergo General Insurance. Cigna TTK is the partner for health insurance. Income from third party products over the last 3 financial years has seen a mixed movement. “It has decreased to Rs 1.04 crore in 2015-16 from Rs1.24 crore 2014-15 but increased to Rs 2.61 cr in 2016-17,” says Venugopalan.
For mutual funds, the bank has tie-ups with Birla Sunlife Mutual Fund, Sundaram Mutual Fund, Reliance Mutual Fund and DSP Blackrock Mutual Fund. The total non-interest income for the last 3 financial years has been rising – to Rs1.78 crore in 2016-17 from Rs1.21 crore in 2015-16 and Rs 1.11 crore in 2014-15.
Marketing, Compliance
Credit marketing department of the bank has made a significant contribution in sourcing credit proposals in FY 2016-17. Various initiatives were taken to generate business from SMEs, mid-size corporates and large corporates. Marketing was also done through a range of seminars and events of different industries to increase sales. “We have planned new ways and strategies each year to target varied businesses and to increase volumes. The marketing department has contributed consistently year on year to the revenues of the bank through substantial increase in the credit portfolio of the bank. Converted leads of over Rs 1032 crore were approved by the bank sourced by the department,” says Venugopalan.
The bank has also undertaken several legal and compliance initiatives, including streamlining and standardization of documentation and the processes to reduce TAT, implementation of ‘timely case information system’ to ensure appropriate legal action; streamlining of MIS to provide relevant updated information and implementation of the system of updation of new judgement/orders on an ongoing basis.
Targets & Vision
The bank expects a moderate growth of 8-10% in the balance sheet size in FY 2017-18. It is now in the process of working out various expansion plans for 2018-19. Says Venugopalan: “We are aiming a business mix of Rs25,000 crore as on 31 March 2018. In the next 5 years, we would double the growth in all the major parameters like business, customer base, etc. We are also desirous of increasing the business per employee, profitability and RoA. As a cooperative bank, we have limitations in terms of capital formation. We have added 58 branches in the last 4 years. At present, we have branches in Delhi, Haryana, Rajasthan and Madhya Pradesh and we intend to expand in states like Uttar Pradesh, Gujarat and other north Indian states in the years to come.”
