The Hindu Business Line : IOB chief raises growth target

INDIAN Overseas Bank's new Chairman and Managing Director, Mr T.S. Narayanasami, has raised the current year's business target to Rs 85,000 crore from the previously set target of Rs 77,400 crore.

Last year, the bank had achieved a total business - deposits plus advances - of Rs 70,500 crore.

The new target fixes the bar at 21 per cent higher than last year's turnover, but Mr Narayanasami says that it is achievable given IOB's brand name.

Incidentally, under his Chairmanship, Andhra Bank achieved a similar growth last year.

Yet, Mr Narayanasami has in mind a relatively modest target for net profit. "It should not be difficult to achieve a net profit of Rs 750 crore," he told Business Line.

That is a 15-per cent growth over last year's net of Rs 651 crore.

The new Chairman's expectations on turnover and net profit perhaps indicate the difficulties he foresees in the Treasury area.

Mr Narayanasami sees interest rates hardening further. In fact, in the first quarter of the current year, the bank had to book depreciation on account of transferring a bunch of securities from "available for sale" to "held to maturity" categories.

He did not want to disclose the numbers, pending formal adoption of accounts.

Mr Narayasami believes that it is possible to achieve the targeted growth in turnover without sacrificing profitability by working towards preserving margins for which there is scope.

Accordingly, he has categorised the bank's branches into deposit collecting "resource centres" and loan giving "profit centres".

Officials of the resource centre branches would be encouraged to build personal rapport with the people of the locality, while those in the `profit centres' would be given "stiff targets" for advances.

For advances, the bank would focus on personal and consumer loans, loans to wholesale and retail traders and SMEs, and deliberately go slow on home loans and advances to AAA-rated corporates where the margins are very low.

The bank would also tap a new source for raising advances - landlords of the bank's leased premises.

IOB has close to 1,500 branches for which the bank has to pay lease rentals.

IOB will work towards giving loans to the landlords for amounts equal to the outstanding lease rentals.

These loans are risk-free as they are backed by the security of the lease rentals - due from the bank to the landlords - and hence could be attractively priced.

Mr Narayasami said that it would be possible to generate advances of Rs 500 crore through this avenue, earning around five per cent spreads.

There will be a renewed drive towards raising non-interest income.

Additional profits are expected from the bank's Rs 200-crore equity portfolio, the markets being good.

Last year, the bank clocked profit of Rs 78 crore from this avenue and it is expected to go up to Rs 100 crore this year.

The existing tie-up with the Life Insurance Corporation of India for selling insurance products would be tapped fully for commission income by bundling covers with loan products.

Life covers for those who opt for educational loans and keyman covers for traders and SMEs are to be pursued aggressively.

On NPAs, Mr Narayanasami said that the target for gross NPAs had been fixed at four per cent, against 5.28 per cent as at the end of 2004-05.

While defaulters would be encouraged to come for settlement, the Sarfaesi Act would be "ruthlessly used", he added.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Charges for 'excessive' use of ATM — ICICI Bank ordered to compensate customer

Rupee sheds gains; securities rise

IOB chief raises growth target

SBH changes helpline number

BoB unlikely to hike rates for now

Union Bank chief sees no reason for rate hike

UTI Bank may sell BPL's Pune property to recover dues

`Allow cos to retire high cost debts'

Loan mela a big draw

Centurion, Bank of Punjab agree to merge

Rs 700-cr NCDC aid for co-ops in TN

Ramakant Nayak is new LVB chief

Executive Directors of Dena Bank, BoB

Prepaid cards set to displace TCs