Indian Bank turns to gold loans, treasury gains

Chennai-based Indian Bank aims to generate Rs 1,000-1,500 crore in treasury income during the current financial year, according to the lender's MD and CEO Binod Kumar. This projection results from the bank's strong first-quarter performance, where it earned Rs 500 crore in the first quarter, significantly surpassing the expected Rs 300 crore.

Treasury income is generated through two primary sources: trading income and interest income from investments. Kumar assured that Indian Bank has been adept at managing asset quality, targeting to reduce gross non-performing assets (NPAs) to 1.5-1.6% of total advances and net NPAs to 0.15-0.2% by the end of the current financial year.

The bank plans to offload Rs 200 crore in bad loans to an asset reconstruction company (ARC) throughout the current financial year. On the asset side, Indian Bank anticipates its gold loan portfolio to surpass Rs 1.5 lakh crore in the current financial year, buoyed by robust demand. Gold loans are considered a safe lending option for banks, as they are not consumption loans but income-generating and beneficial for small businesses' growth.

Kumar explained that the gold loan segment is expected to grow about 20% this year, despite a 30% decline in gold prices compared to last year, when the segment witnessed a significant 30% growth due to surging gold prices. Currently, the gold loan portfolio stands at around Rs 1.25 lakh crore, and with an anticipated growth rate, it should exceed Rs 1.5 lakh crore during this financial year.

In terms of loan distribution, 65% of Indian Bank's loan book comprises Retail, Agriculture, and Micro, Small, and Medium Enterprises (RAM), while the remaining 35% is from corporate clients. The bank intends to maintain this 65-35 ratio moving forward, highlighting that RAM has immense potential for growth, particularly in agriculture and MSMEs.