IOB will increase lending to retail, MSMEs, corporates and the agricultural sector in FY23

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The state-owned Indian Overseas Bank (IOB) plans to increase its progress in the current FY23 through secular growth in sectors such as retail, micro, small and medium-sized enterprises (MSMEs), and corporate and agricultural credit. The bank’s management does not expect any material impact on the bank’s liquidity or profitability.

Partha Pratim Sengupta, IOB’s Managing Director & Chief Executive Officer, told shareholders in the FY22 annual report that the Covid-19 pandemic has led to a slowdown in economic activity and movements in financial markets around the world.

He added: “In this situation, the Bank has prepared to meet the challenges, has continuously assessed the situation and proactively prepared for the challenges of a likely strain on the Banks’ assets as required. The bank’s management does not expect this to have any material impact on the bank’s liquidity or profitability.”

In FY22, IOB significantly reduced its gross NPA to 15,299 crore compared to 16,323 crore in the previous fiscal year and therefore reduced the GNPA% from 11.69% to 9.82% through multi-pronged and focused recovery initiatives.

In addition, the net NPA fell 3,825 crore in FY22 from 4,578 million in FY21. In percentage terms, net NPA fell to 2.65% from 3.58% in FY21.

IOB’s Provision Coverage Ratio (PCR) has also improved significantly from 90.34% to 91.66% as of March 31, 2022 – one of the highest in the industry.

In addition, IOB’s net income doubled 1,709 crore in FY22 compared to 831 crore in FY21. Meanwhile, net interest income (NII) jumped 6,311 crore in FY22 versus 5,899 crore in FY21.

CASA has improved to from Rs.102165 Crores as of 31st March 2021 1,13,877 crore as of March 31, 2022, with a growth of 11.46%. CASA% is up from 42.52% in FY21 to 43.44% in FY22.

For FY23, Sengupta said, “Indian Overseas Bank aims to increase advances in the current fiscal year with secular growth in retail, micro, small and medium-sized enterprises (MSMEs) and corporate and agricultural lending.”

“Backed by a huge base of several loyal customers and a large base of young, strong and energetic workforce, Brand IOB is sure to play an important role in the banking industry,” added Sengupta.

For the banking sector, IOB Managing Director and CEO said: “India’s retail inflation exceeded the upper limit of the Reserve Bank of India’s target range in April 2022 for the fourth consecutive month. The increase is largely due to rising fuel and food prices due to the war between Russia and Ukraine. Projections indicate that inflation is likely to remain above the 6% upper tolerance limit in the first three quarters of 2022-23.”

“Therefore, calibrated monetary policy measures were needed to keep inflation under control,” he said.

Sengupta added: “Following the two rate hikes by the Reserve Bank of India, banks are passing on the benefits to customers and raising their deposit rates. The rate of pass-through has improved for external benchmark-linked loans. We could also see further rate hikes from the Reserve Bank of India over the next few MPCs to ensure inflation stays on target going forward.”

India Ratings has revised its 2022-23 outlook for the banking sector to “improving” from “stable” on the back of better loan demand and a strong lender balance sheet, Sengupta cited.

In the banking sector, Sengupta said: “For the next fiscal year, loan growth is expected to increase to 10% and the gross non-performing asset ratio (GNPA) to 6.1%.”

IOB stocks closed on BSE 16.95 apiece, up 2.73% on Friday.

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