South Indian Bank to raise Rs 240 cr from life and general insurers
Kerala-based South Indian Bank (SIB) has got Board approval to raise Rs 240 crore from HDFC Life, Kotak Mahindra Life, SBI Life and ICICI Lombard on a preferential basis. The Bank is also planning to raise another Rs 510 crore to support its Vision 2024, which will focus on 6Cs.
SIB reported a net loss of Rs 92 crore during the quarter ended December 2020, as compared to Rs 91 crore profit during the same period last year. The loss was largely due to four extraordinary events including provision on security receipts (SRs), cumulative interest reversal upfront provision and one time additional employee provision requirement on account of the wage settlement which got finalised during the quarter.
The lender's focus has been on improving the granularity of the loan book and the bank has been consciously increasing the mix of Retail, Agri, and MSME loans. It is targeting a Rs 71,000-72,000 crore deposit (retail) book by 2024. SIB’s corporate book is expected to come down to 15 percent from the 24 per cent, as the bank is planning to focus on RAM (retail, agriculture and MSME). RAM contribution is expected to increase to 85 in the next three years as against 76 percent now. By 2020-24, SIB targets a loan book of Rs 1 trillion (from Rs 63,000 crore as of December 2020) CASA(1) mix of 35 per cent (28 per cent as of December 2020), and PCR(2) of over 65 per cent (around 72 per cent including write-offs as of December 2020 NIM(3) of 3.5 percent).
Jargons
(1) CASA ratio of a bank is the ratio of deposits in current and saving accounts to total deposits. A higher CASA ratio indicates a lower cost of funds, because banks do not usually give any interests on current account deposits and the interest on saving accounts is usually very low 3-4%.
(2) PCR (Provision Coverage Ratio) is the ratio of provisioning to gross non-performing assets. It indicates the extent of funds a bank has kept aside to cover loan losses.
(3) Net interest margin (NIM) is a measurement comparing the net interest income a financial firm generates from credit products like loans and mortgages, with the outgoing interest it pays holders of savings accounts and certificates of deposit (CDs).
Source: Business Today