The Hindu Business Line : Standard Motors' payment buoys IOB recoveries in Q2

A payment of Rs 16.26 crore from the `Standard Motors' account that Indian Overseas Bank received towards the end of September, was partly responsible for a 49-per cent increase in the bank's recoveries in the second quarter of this year.

The bank recovered Rs 112 crore during the quarter, compared with Rs 75.54 crore in the same quarter last year. In the first half of the year, recoveries amounted to Rs 184 crore, 36 per cent higher than Rs 135 crore in the corresponding period last year.

Answering a question, Mr K.E. Venugopal, General Manager, IOB, told Business Line that the higher recoveries in the second quarter may, however, not have an effect of increasing the profits for the quarter.

This, he said, was because the Reserve Bank of India conducted its `annual financial inspection' (AFI) in the second quarter of the year itself, rather than in the third quarter, which was usually the case. As it usually happens with most banks, after the AFI, a higher NPA amount is recorded in the books, because RBI officials tend to interpret the NPA recognition norms strictly.

In the case of IOB, because the AFI happened earlier than usual, the higher `NPA load' was recorded in the books earlier, in the accounts for the first half of the year. As a consequence, in a quarter-to-quarter comparison, IOB's third quarter results would be better.

Even after higher NPA load on account of the earlier AFI, IOB's net NPA levels are not likely to be higher than March 2006 levels, Mr Venugopal said. As at end-March 2006, the bank's NPAs stood at Rs 1,198 crore. In percentage terms, gross NPA was 3.43 per cent and net NPA, 0.65 per cent.

Bonds issue

Meanwhile, IOB recently announced that it raised Rs 80 crore through an issue of perpetual bonds — its third. The first issue was towards the end of last year and the second was a few months later. The bank appears to have got a good rate — 9.2 per cent, payable twice a year — for a higher-risk instrument, (because return of money to the subscribers is at the option of the bank).

Mr C. Rangarajan, Assistant General Manager (Funds), told Business Line that three entities subscribed to the perpetual bonds issue: GMR group Rs 30 crore, State Industrial Corporation of Maharashtra (SICOM) Rs 25 crore and Welspun Gujarat Rs 25 crore.

Rates revised

In another development, IOB has revised its FCNR interest rates with effect from October for all foreign currency deposits. The rates offered for US dollar are one year to less than two years 5.3 per cent, two years to less than three years 5.09 per cent, three years to less than four years 5.01 per cent, four years to less than five years 5.01 per cent and for a maturity of five years only, the rate is 5.04 per cent.

The interest for other currencies have also been revised in line with the market trend, says a press release. The bank has also revised interest rates for NRE deposits: One year to less than two years 6.3 per cent, two years to less than three years 6.1 per cent and 3 years and above but less than five years 6 per cent.

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