Dhanlaxmi Bank, a private lender in India, has made it clear that it does not intend to close any of its branches or downsize its operations. Instead, the bank is taking proactive measures, including implementing salary cuts, to rein in costs amidst challenging profit margins. PG Jayakumar, the bank's chief executive, reassured stakeholders by stating, "We have no plans to shut down any of our branches. We want to grow," while addressing reporters.
In a strategic move, the small-sized bank also intends to relinquish excess real estate holdings in metropolitan areas and significant cities. Recent reports, however, from the Economic Times newspaper indicated that the bank is considering shutting down around 30 branches in major urban centers as part of its revival plan.
In the December quarter, the bank faced significant challenges, swinging to a net loss of approximately 370 million rupees (equivalent to $7.2 million) due to soaring costs and diminishing revenues. The surge in consumers and businesses opting for long-term deposits has significantly burdened banks with increased costs, while lenders grapple with the challenge of expanding their loan portfolios to enhance profitability.
Despite the financial strain, Dhanlaxmi Bank expressed confidence, asserting, "Strain on profits in one or two quarters is not going to affect us badly," in a statement released on Monday. The bank is setting its sights on growth through focusing on loans secured by gold, supporting small and medium enterprises (SMEs), and retail businesses. It anticipates achieving a net interest margin of between 2.5% and 3% for the current financial year, which concludes in March.
Moreover, Dhanlaxmi Bank outlined plans to raise 2 billion rupees each of tier 2 and tier 1 capital in the first and second quarters of the fiscal year, respectively. In Monday's trading session, the shares of the bank, which has a market capitalisation of approximately $126.3 million, saw a decline of nearly 2% in a lackluster Mumbai market.