Taken various measures to offset impact on NIM, says IOB MD Ajay Kumar Srivastava-OxBig News Network

State-run lender Indian Overseas Bank (IOB) has taken various measures to offset the impact on its net interest margin (NIM) from the repo rate cut by the Reserve Bank of India (RBI), its Managing Director and CEO Ajay Kumar Srivastava said.

“There has been a total repo rate cut of 1% in the last four month. [As much as] 50% of our portfolio is linked to the repo rate and these loans instantly get repriced. So, our interest income and NIM are going to be impacted,” he said in an interview.

“One of the major source of low-cost funds is Current Accounts and Savings Accounts (CASA). To bring new customers to our fold, the bank is also opening new branches in unbanked areas or where our presence is not available. By doing this, the bank is able to maintain CASA deposits at more than 43% of total deposits which is helping the bank in keeping the overall cost of funds at lower side,” Mr. Srivastava said.

“The bank has taken a conscious decision to restrict bulk or wholesale deposits to 5-10% of the total deposits. Moreover, the bulk deposits are being taken only for the short-term buckets, which ensures that the bank is not locked in for paying higher rates of interest for longer term,” he said.

“Retail term deposits rates were changed only after RBI’s announcement of 50 basis point reduction during this month, as the bank can’t afford to offer high rates on retail term deposits and low rates for loans. Hence, to strike the balance, the bank has revisited the term deposit rates also”, Mr. Srivastava said.

IOB is also emphasizing to increase its Marginal Cost of Funds-Based Lending Rate (MCLR) linked Loan portfolio which shall help the bank in reducing the volatilities erupted due to sudden change in RBI Policy Repo Rate, he said.

However, Mr. Srivastava pointed out that as per the regulatory prescription, the bank’s retail/ MSME lending is linked to External Benchmark based lending rate (EBLR), which is linked to the repo rate.

He also said the full benefits of the cut in cash reserve ratio would be visible only from the fourth quarter, when the money would come into the system.

Mr. Srivastava said IOB’s credit growth is expected to continue around 14-15% in the financial year 2026, like last year.

“Our strategy for the current financial year is to achieve a deposit growth of around 12% to 13%, when compared to 9.11% last year,” he added.