**Title: Indian Bank’s New CEO Binod Kumar Aims to Shift Focus Towards MSME Loans**
In his inaugural month as CEO of Indian Bank, Binod Kumar is set on transforming the lender’s credit strategy in response to concerns regarding a slowdown in personal loans. Kumar’s strategic adjustments could significantly influence the bank’s trajectory.
As he steps into his role, Kumar is keen to revise the state-run lender’s approach, albeit with a measured and steady strategy. With apprehensions surrounding a potential decline in the personal loans sector, he aims to bolster the currently smallest segment of the bank’s ‘RAM’ portfolio—retail, agriculture, and micro, small, and medium enterprises (MSMEs). His ultimate objective is for MSME loans to surpass both retail and agriculture loans in contribution.
Presently, agriculture loans represent approximately 25% of Indian Bank’s total domestic loans, which amount to ₹5.2 trillion, followed by retail loans at 21% and MSME advances at 17%. Kumar expressed, “My vision is to elevate the share of MSME loans from 17% to at least 20% within the next 2-3 years.” He believes that a heightened emphasis on lucrative MSME loans will enhance the bank’s yield on advances, complemented by other high-yielding segments in agriculture and corporate loans.
Kumar, who previously served as an executive director at Punjab National Bank, assumed the role of managing director and CEO of Indian Bank on January 16. He noted, “We are particularly keen on increasing our exposure to MSME loans and have initiated various measures to achieve this.”
The bank’s yield on advances for the December quarter was recorded at 8.92%, an increase from 8.77% in the previous quarter and 8.78% a year prior. This renewed focus on MSME loans comes as the growth rate of agriculture loans has slowed to 13.5% in the December quarter, down from 16% in the same period last year, while MSME loan growth improved to 8.2% from 7%. Retail loan growth also saw an uptick, rising to 15.8% in the October-December period from 14% a year earlier.
However, within the retail loan category, personal loans experienced a notable decline, contracting by 14% year-on-year in the December quarter after previously growing at 30% in the third quarter of FY24 and 35% in Q3 FY23. A recent Fitch Ratings report indicated that stress in unsecured retail loans, including personal loans and credit cards, accounted for approximately 52% of new bad retail loans in the first half of the current fiscal year (April-September 2024).
Kumar’s emphasis on MSME lending is also a reflection of Indian Bank’s increasingly cautious approach towards high-growth retail loans, particularly personal and microfinance loans, in light of rising delinquency rates.
