Indian Bank expects steady growth and stable asset quality despite high deposit competition

Indian Bank Managing Director and Chief Executive Officer Binod Kumar expects the bank to keep its growth strong, maintain profits and protect asset quality in the coming quarters. This outlook comes even as tough competition for deposits puts pressure on banks across the country. ## Lending and Interest Rates The Reserve Bank of India recently raised the repo rate by 25 basis points. Kumar notes that future interest rates will depend on inflation and US Treasury yields. He does not expect higher rates to cause major trouble for asset quality. While some retail borrowers may face pressure when their monthly loan payments reach maximum levels, banks can extend loan time periods or reset repayment plans. The bank aims for a credit growth rate of 14 to 15 percent for the current financial year, while actual credit growth has run around 18 to 19 percent. Retail credit is expected to grow by 15 to 17 percent, and corporate lending should see lower double-digit growth. Housing and mortgage loans are growing quickly at 28 to 30 percent. Meanwhile, corporate credit demand is good, particularly for green energy, data centres, and power projects, though the bank remains careful about lending at very low interest rates that do not cover operating expenses. ## Deposits and Capital Getting people to deposit money remains a difficult challenge for bank heads, especially for current account and savings account deposits. Indian Bank has managed to keep the gap between deposit growth and credit growth at 1 to 1.5 percentage points. The bank's gold loan book sits at around Rs 1.4 lakh crore, pushed up largely by higher gold prices rather than speculative borrowing. The bank holds a capital adequacy ratio of 16.21 percent, which could rise to about 17.5 percent as profits are ploughed back. There is no immediate need for capital, but the bank may consider raising about Rs 2,000 crore through a Tier-II bond in January if market rates are good. Technology spending stands at around Rs 2,300 crore, with artificial intelligence being added to customer service, systems, and MSME lending models. Kumar believes artificial intelligence will change the type of jobs in banking rather than destroy them, and the bank is training staff to handle these changes. In the second quarter, deposits grew by 12.5 percent and credit grew by 16.39 percent, while gross NPAs dropped to 1.61 percent and net NPAs fell to 0.14 percent. ## Context Public sector banks in India regularly balance regulatory rate changes from the central bank with everyday deposit mobilisation to protect their profit margins. Managing non-performing assets and maintaining healthy capital buffers remain central responsibilities for bank leadership in the country's growing financial sector.