Venkatachari Jagannathan
16 May 2001

On normal days the head office of the Chennai-based Indian Bank is out of bounds for press. There is an unwritten code that the bank officials will address the press only through formal press conferences. Though officials deny the existence of such a code, nevertheless they remain tightlipped even on innocuous matters.

The reason touted being, Indian Bank is on its turnaround path and the results should speak for themselves. The bank at this juncture certainly does not want any wrong reporting or bad publicity.

In fact the bank is acquitting itself quite well on various parameters while asking for additional infusion of funds to meet the capital adequacy norms.

"We might be doing well now and regain a healthy balance sheet soon. But the bank still needs recapitalisation funds to meet the prudential norms," declares Mrs. Ranjana Kumar, chairperson and managing director, Indian Bank.

According to her, the prudential norms laid down by Singapore and Sri Lankan banking authorities require such recapitalisation as soon as possible, she adds. The bank needs around Rs.2, 000 crore as equity infusion to meet the prudential norms.

Earlier sharing the pre-audit provisional results with the press Mrs. Kumar said, "The performance of the bank vis-à-vis the restructuring plan has been quite gratifying. We have achieved or even exceeded the targets set under the plan."

Once a gargantuan bank with huge non-performing assets (NPA) the bank has been slowly progressing towards a better position under the chairmanship of Mrs. Kumar, who assumed office very recently.

According to Mrs. Kumar, the gross domestic NPA at the end of last fiscal is around Rs. 2,200 crore down from Rs. 2,836 crore registered during 1999-2000. Even the banks' overseas branches reduced their NPA levels to Rs. 308 crore at the end of last year as against the earlier years figure of Rs. 519 crore.

"Out of global NPA recovery of Rs. 549 crore during the year, domestic NPA recoveries accounted for Rs. 482 crore, the highest ever made by the bank," she announced.

Under the Reserve Bank of India's (RBI) compromise policy, sanctions have been accorded upto end March, 2001 to 27, 975 accounts for a recovery of Rs. 495 crore and the bank has so far recovered a sum of Rs. 160 crore in 13,760 accounts. In order to keep a strict watch on its advances, Indian Bank has set up a Standard Assets Monitoring Cell.

Last fiscal the banks global advances stood at Rs. 11,031 crore. In line with the industry trend the bank last fiscal got into consumer loan segment – financing of vehicle purchase, consumer durables, cost of education, kisan bike scheme etc. "A sum of Rs. 240 crore was disbursed to over 77,000 borrowers," she said. "We will soon launch credit schemes for professionals at competitive terms," she announced.

On the deposits side, the banks' total deposits stood at Rs.21, 721 crore, of that domestic deposits accounting for Rs. 20, 575 crore. Even during its bad days, Indian Bank experienced a surge in deposits, certainly not a run on its deposits.

"Last year domestic deposits increased by Rs. 2,624 crore (14.62 per cent) as against Rs. 1,992 crore (12.48 per cent) registered the year before," Mrs. Kumar said. What is notable is the Rs. 595 crore growth in low cost deposits - savings bank- last year.

While the banks deposits went up its cost of deposits came down to 7.90 per cent from 8.41 per cent during 1999-2000. The banks' net interest income went up by Rs. 94 crore to Rs. 474 crore last fiscal.

The reduction in funds cost and the increased interest income has naturally impacted the banks bottom line positively. "The global operating profit for the year 2000-01 more than doubled as compared to Rs.23.86 crore posted the year before," declared a proud Mrs.
Kumar.

Queried about the banks subsidiaries she said the housing finance subsidiary-Ind Bank Housing will be merged with the bank in six weeks time while the mutual fund outfit will be sold.

That apart, Indian Bank is taking a critical look at its branch network and the pruning process is already on. Till date the bank has merged 73 branches. While that is at the grass root level, the bank has abolished one tier in the organisational structure, that is, the Zonal Offices.

"Today we have three tier organisational structure viz branch office, regional office and the head office. With that additional powers has been delegated to officials to speed up the decision making process," she added.

Similarly, branch segmentation -corporate, commercial, personal and rural- has been done to cater to the needs of various target markets. Waking up to the reality of ATMs, the bank commissioned 54 machines last year and increased the ATM card base to over 1.25 lakh," Mrs. Kumar, said.

Delayering apart, the bank reduced its staff strength by 3,046 under its voluntary retirement scheme (VRS). Short of cash, the bank plans to settle their accounts partly by cash and the balance by issuing bonds.

While these are on the traditional banking business side, Indian Bank has decided to venture into marketing of insurance products. While talks are going on with couple of general insurance companies for that purpose, the bank has already tied up with HDFC Standard Life for selling the latter's life insurance policies.

However an agency with a general insurance company is more lucrative. Even a conservative 5 per cent insurance agency commission calculated on its present advances base of Rs. 11, 031 crore the bank will be richer by a whopping Rs. 551.55 crore. Currently the bank insures its loan securities with the government insurance companies.

So what next?

Outlining the banks' plans for this fiscal, Mrs. Kumar said the bank apart from reducing the prime-lending rate to 12 per cent from 12.5 per cent has introduced a short tenor prime lending rate loan.

The bank has selected 56 branches for lending volume credit while other branches will concentrate more on resource mobilisation. On the business front, Mrs.Kumar targets a global business of Rs. 38,000 crore (deposits and advances put together). "On the technology front 77 per cent of the bank's business will be covered through computerization by end March 2002 and 80 per cent by March 2003," she remarked.

While she expects the global NPA to come down to 9 per cent of the credit, the operating profits is expected to zoom by 60 per cent.

And till such time, it seems the banks headquarters will be out of bounds for the scribes expect for the formal press conferences.

 
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