The Hindu Business Line : Indian Bank plans to expand Tier II capital by Rs 300 cr

INDIAN Bank has proposed to raise Tier II capital to the extent of Rs 200 crore -Rs 300 crore during the current fiscal. The bank, now owned entirely by the government, is also eyeing an equity issue in 2005 to carry out an expansion programme.

According to Mr M.B.N. Rao, CMD, the proposal is part of the bank's plans to strengthen its capital base after having turned around over the past couple of years. The turnaround has been followed up with an non-performing asset (NPA) recovery process.

Indian Bank, which had aimed at a recovery target of Rs 200 crore this year, has already gone past the mark. It has, in fact, set a fresh target — Rs 250 crore — that is likely to be achieved by the end of the current financial year. Its net NPAs now stand at around 4.85 per cent. Incidentally, the bank has a capital adequacy ratio of 12.85 per cent.

As for the IPO that may be expected next year, Mr Rao said the bank was yet to settle on the details, adding that it was too premature to discuss the amount that may be raised from the public. "Unless we raise more capital, we cannot grow our asset base further," he said.

In the meantime, Indian Bank, which will complete 100 years in 2007, will actively look at retail lending in the coming days. There is considerable scope for developing good housing and auto finance portfolios, it is felt. The next few years will see the bank boost its retail business, which now constitutes around 20 per cent of the total.

The Kolkata market, the CMD pointed out, had provided the bank good business opportunities in recent times. It has already evinced interest in funding self-help groups in West Bengal in association with the local government. Discussions with Mr Asim Dasgupta, the State Finance Minister, were held on the subject recently. Home loans are a key area for the bank's Kolkata circle; fresh disbursements here during the past nine months stood at nearly Rs 17 crore.

On another front, Indian Bank has entered into distribution tie-ups with United India Insurance and HDFC Standard Life. More such associations may materialise in future. Over the next couple of years, it will put into effect a core banking solution package. The process of selecting vendors for its implementation has commenced.