Bharat Overseas Bank Ltd: Burdened by NPA''s

Last fiscal, the Chennai
04 September 2000

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.