There has been a sudden surge in credit offtake in September after a subdued performance in the first five months. Is the spurt in credit growth sustainable?

Efforts were being made to increase credit from the beginning of the year. So it is very likely that many of the earlier sanctions crystallised into disbursements last month. With the onset of a busy season, credit should be on the right course.

Would banks be forced to revise business performance targets?

It depends on each bank. Domestic credit, in our case, grew by Rs 5,000 crore (Rs 50 billion) in the first half. It is a fairly comfortable situation, but not to the extent that we wanted. The disbursements in this quarter should be about Rs 7,000-8,000 crore (Rs 70-80 billion) and this should keep us on course.

How have the curbs on external commercial borrowings (ECBs) impacted the bank's overseas business?

The curbs have not impacted our business as we are funding corporates looking for capital expenditure directly from overseas branches. ECBs come into picture only when the money is coming into India.

We are funding mergers and acquisitions by Indian companies and are giving foreign currency loans for acquisitions abroad. The share of overseas advances in the bank's book is 20 per cent (the total advances stood at about Rs 87,000 crore (Rs 870 billion) at the end of June 2007).

Is there a case to lower the lending rates so as to boost demand?

No bank will be in a position to bring down lending rates unless deposits rates as a whole come down. That is too difficult or too good to happen. As long as a bank is able to lend at current rates, paying nine per cent interest annually on deposits is sustainable.

Some peer banks did attempt to bring down the deposits rates, but had to back-track within a week. We could raise about Rs 5,000-6,000 crore in the first quarter and are in a position to take care of disbursements for which sanctions are already in place.

New sanctions will be taken care of from the present accretion to deposits. In case there is further growth in credit offtake, we may launch another campaign for term deposits.

Are there other business areas you are looking to target to augment fee-based income?

We would love to go into areas such as mutual funds and a credit card subsidiary, depending upon how affluent we are in terms of capital resources.

The Indian bank [Get Quote]s do not have expertise in credit cards and haven't fared as well as the foreign counterparts. So, for the credit card subsidiary, we would like to have the best partner available globally and take an Indian bank to supplement the capital requirements.

Is the bank planning to raise capital by placing equity with qualified institutional investors?

I have to go public, whether it is qualified institutional placements or through a follow-on public offer. Equity may be diluted to some extent, provided there is surplus capital. Conforming to the Basel II norms is a priority for us.

Have you seen a dip in low cost deposits (current account and savings accounts - CASA)  in the second quarter due to special deposit schemes for term deposits?

Whether you go in for a special deposit scheme or not, low cost deposits are coming down. Never in the past have we paid nine per cent plus interest on term deposits and hence there is an internal diversion from savings to term deposits.

The resources would migrate to banks in the absence of such schemes. CASA will help in bringing down the negative impact of high cost resources.

By itself, it will not substitute the entire resource portfolio for lending. Banks with high CASAs have a better NIM. But NIM is not the only factor. The balance sheet can be extremely good in the absence of such schemes.