Mumbai : State-run Vijaya Bank on Friday cut its net interest margin (NIM) forecast for FY12 to 2.75-2.80% , and said maintaining growth is a challenge in the current economic scenario.
The lender had forecast NIM at 3% at the beginning of the current financial year, and had expected a 25% growth in business.
“To grow at these levels, is too much to dream for in the current circumstances,” chairman and managing director H. S. Upendra Kamath told reporters at its earnings press conference.
“I am extremely careful with regards to credit collection. Even growing CASA (low-cost current account savings account deposit) is extremely challenging.”
He said he would consider reviewing the guidance for business growth in September.
The Reserve Bank of India (RBI) raised rates last week by a steeper-than-expected 50 basis points, becoming one of the most aggressive major central banks, having effected 11 rate increases since March 2010.
Expectations for interest rate increases in India for the remainder of 2011 have jumped 50 basis points from a previous poll after the central bank raised policy rates last week, a Reuters snap poll found last week.
High interest rates have hurt business growth and new investments. India’s industrial output rose at its weakest pace in nine months in May, the latest sign of slowdown for Asia’s third-largest economy.
Vijaya Bank posted more than a 58% fall in net profit in the June quarter, on higher provisioning costs, and NIM dropped to 2.3% from 2.9% a year ago.
Total provisions increased to Rs 253 crore from Rs 140 crore a year ago.
Net NPA increased to 1.65% from 1.36% a year ago, while there were fresh slippages worth more than Rs 600 crore during the quarter.
Bankers have said further rate rises could have an adverse imapct on asset quality.
The lender’s loan growth for the quarter stood at 22% and deposit grew at 21%.
“Credit offtake for industries is not happening because new capex is not coming up. Interest rate scenario is not viable for new projects,” Kamath said.
“Those (projects) which are on the drawing board are put on hold. No new mega projects are coming up altough sanctions already given for projects are going through,” he added.
Shares of Vijaya Bank ended down 3.63% at Rs 59.75 in the Bombay Stock Exchange.