Last fiscal, the Chennai-based private sector bank, Bharat Overseas Bank Ltd (BOBL), achieved a growth, but in the wrong places! The bank's gross non-performing assets (NPA) scaled new heights during the financial year ended March 31, 2000, to reach Rs. 81.90 crore as compared to Rs 52.13 crore disclosed during the previous financial year. Fresh NPAs of Rs 34.89 crore were added last year. Consequently, the provision for NPA's went up to Rs 12.61 crore during the financial year, as against Rs 2.54 crore provided the previous year.

The effect of this clearly reflects on the bank’s bottom line. BOBL's net profit came tumbling down to Rs 1.03 crore for the year 1999-2000 from Rs 11.25 crore posted the previous year. Further, the capital adequacy ratio came down to 12.68 per cent last fiscal from the previous year’s figure of 13.7 per cent.

Last year the bank had made a total advances of Rs 552 crore compared to Rs 511 crore made the earlier year a meager 8 per cent growth as against the industry average of 16 per cent. While deposits collected from its Indian operations increased to Rs 1,210 crore from Rs 1,043 crore last year, deposits of the bank’s Thailand branch showed a negative trend, despite the fact that advances made by the foreign branch increased by Rs 21 crore last year when compared to the previous year.

Mr. G. Krishna Murthy, the bank’s new chairman, who was appointed after the Madras High Court dismissed the appointment of an earlier candidate, clearly has a tough task ahead in reducing the bank's NPA and uplifting the morale of the employees.

Speaking about his plans for the bank, Mr. Murthy cited the spread of the bank’s branch network and said, "Except for six branches in the network of seventy 70 branches, all others are located in metros and urban centres. We will leverage this network to access corporate accounts." According to him the bank would target "AAA" rated companies and would even be ready to lend at sub-prime lending rate (PLR) to them.

That aside, Mr. Murthy is planning to steer BOBL into the lucrative housing loan segment and loans for traders. "These two are on the drawing boards. We have to get Reserve Bank of India's approval as to our limits for lending for housing sector," he adds.

In order to strengthen the loan recovery efforts a separate recovery and law department has been set up. He has appointed two other cells: one to monitor credit and risk management and the other to monitor the asset: liability mismatches and to take corrective actions that will protect the net interest margin.

The bank is also planning to invest heavily in automating the branches. It plans to begin by networking intra-city first and later go in for inter-city networking of the branches. According to Mr. Murthy, the bank is in the process of considering the vendors for the purpose.

No other Indian bank management had such bad industrial relations, as BOBL has experienced during the past seven years. The employees had gone on nationwide strike for 40 days two years ago.

Speaking about his approach towards normalising the industrial relations between the management and the employees/unions Mr. Murthy promises, "I will sort out all the thorny issues with humane approach."

.List of reports Bharat Overseas Bank