IOB plans to shift 50% of portfolio to MCLR-linked loans

Indian Overseas Bank (IOB) is gearing up to aggressively expand lending to the 14 sectors identified under the government's production linked incentive (PLI) scheme.

- Ajay Kumar Srivastava, MD & CEO, Indian Overseas Bank

In an interview with Narayanan V, MD & CEO Ajay Kumar Srivastava outlines the lending focus for the current fiscal, and how the bank aims to cushion margins amid an expected rate-cut cycle. Excerpts:

Is the sluggish credit growth in the industry a concern?

I wouldn't directly link the slowdown in the credit growth to lack of credit demand. We are seeing a healthy traction in demand across retail, agri, MSMEs, and even corporates. I'm not referring to large corporates with credit needs of ₹1,000-₹2,000 crore, but there is reasonable demand from the broader corporate segment. One key reason for the moderation in the credit growth is the lack of resources. While credit has been growing at 14-15% over the past two-three years, deposit growth remains in single digit. Despite best efforts of banks, the credit-deposit gap persists due to limited deposit accretion. Although there's no prescribed credit-to-deposit ratio, banks prefer to stay within a comfortable threshold.

So, the current pace of the credit growth—especially for most banks—can be attributed to constrained availability of resources, rather than weak demand.

Deposit mobilisation has been a challenge for the industry. Has it improved?