After completing more than a one year out of the Prompt Corrective Action (PCA) regime, public sector lender Bank of Maharashtra (Maha Bank) will step up exposure to corporates through low risk loans.

It has already disbursed about Rs 1,500 crore in two months of the current fiscal (FY21), mostly companies with government backing. Reserve Bank of India had placed curbs on incremental lending to corporate sector after bank was put under PCA regime over deterioration in its financial and credit profile.

The Pune-based lender plans to grow total loan book by 12-13 per cent in FY21. However, this target is subject to review every two months due to uncertainty over the fallout of Covid-19 pandemic.

A S Rajeev, managing director and chief executive, Maha Bank, said that while lending to corporates bank would focus on entities which have guarantees from state government, the diligence on such exposures would remain stringent. He said that the guarantees reduced asset quality risks.

The bank's credit portfolio grew by 1.52 per cent to Rs 94,889 crore in March, 2020. The corporate and allied portfolio shrank by 11.54 per cent to Rs 40,530 crore in March 2020. The retail advances grew by 21.30 per cent to Rs 22,810 crore and the MSME advances grew by 25.04 per cent to Rs 17,164 crore.

In January 2019, RBI had removed Mahabank from the PCA workout after it met the regulatory norms, including the capital conservation buffer (CCB) and had net non-performing assets (NPAs) of less than 6 per cent in third quarter results (Q3FY19).

The lender has benefited from government departments and public sector undertakings pulling out funds from private banks and placing them with state-owned banking entities. Almost Rs 5,000 crore have moved into current accounts and saving accounts due to these flows, Rajeev said. The amounts in CASA pool rose to Rs 75,475 crore in March, 2020, from Rs 68,246 crore in December, 2019. The share of CASA in total deposits rose from 48.07 per cent in December, 2019, to 50.29 per cent in March, 2020.

Referring to capital usage for credit growth, he said the current capital adequacy ratio of 13.52 per cent (March 2020) plus profits during current year can support growth for 1.5-2 years. The bank would like to maintain CAR the above 12.5 per cent level, he said.

The bank will review the capital requirements after extended moratorium on repayment ends in August, 2020. The lender has headroom to raise tier II capital and the amount could be up to Rs 1,000 crore, he added.