ET Now: Macquarie has said that the company is taking a risk by giving high yielding loans to MSMEs, how are you evaluating the space when you give out the loans?
Dr N Kamakodi: Honestly speaking, almost all scheduled commercial banks were focused on the working capital loan, particularly to the small and medium scale enterprises, who were not going for term loans 20-25 years ago – before the arrival of the new generation bank – subsequently, things changed and the concept of term loans become popular.
A lot of banking’s time tested values were questioned and many of our peers migrated to newer initiatives – exposure to the infrastructure sector, getting into consortiums – that, in fact, did not end up being very profitable to the system at large, and even ended up creating a lot of issues.
We only did one thing, we continued with the old way of banking, without compromising the systems put in over centuries. We are perhaps the third oldest bank in the country after
and . That’s how we were able to get the risk-adjusted return you refer to.
ET Now: After the
fiasco, investors’ focus has been having on granular books; how granular are your books, in terms of deposits as well as liabilities?
Dr N Kamakodi: In fact, since you quoted the Macquarie report, they have clearly spelt it out. We are perhaps one of the lowest in the industry in terms of our overall advances book and the concentration risk is very less if you measure from that perspective.
Overall, we had always maintained that we have been a banker for the ‘aam aadmi’ and not hugely involved in corporate banking. Our focus is on small and medium scale enterprises and to be the sole banker, having total control over assets and cash flows; which has helped us to ensure that we are not putting all our eggs in one basket. We have a portfolio which is very granular – that has helped us to tide over many economic cycles which the banking industry has seen over a period of 100 years.