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Our Bureau

To hike prime lending rate by 50 basis points

BRANCH RELOCATED: Mr Prakash P. Mallya (right), CMD, Vijaya Bank, and Mr Ne la Narendra Babu, MLA, at the locker room of the relocated Vijaya Bank Rajajinagar's branch in Bangalore on Monday. — G. R N Somashekar

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Bangalore Feb. 19 Vijaya Bank will be raising its Benchmark Prime Lending Rate (BPLR) by 50 basis points to 12.25 per cent. A formal announcement will be made soon, said the Chairman and Managing Director, Mr Prakash P. Mallya.

The bank also plans to raise Rs 200 crore through Tier two capital this fiscal.

Addressing a press conference after formally opening the new premises of its Rajaji Nagar branch here on Monday, Mr Mallya said the rate hike was in step with the industry trend following the Reserve Bank of India's move to control the rising inflation. The bank had recently revised its rates to augment its deposits base.

Mr Mallya said he saw no liquidity crunch as far as his bank was concerned and felt with its net interest margin above the comfort zone of three per cent at 3.09 per cent the impact of RBI's announcement of higher cash reserve ratio and repo rates would have little effect on its overall lending business. This, along with higher cost of fund, could generally have pressure on credit growth.

Vijaya Bank, however, would adopt a selective approach for lending to retail customers as it entailed higher provisioning and risk. Retail lending accounted for 35 per cent with housing loans being 55 per cent of this.

On the growth plan, Mr Mallya said Vijaya Bank was targeting a Rs 60,000 crore business during the current fiscal. Of this deposits would comprise Rs 36,000 crore. For the nine months of this fiscal, the bank had earned a profit of Rs 160 crore and it expects it to touch Rs 360 crore for the full year.

During FY 2006, the bank had an overall business of Rs 44,000 core.

Mr Mallya hoped that the bank would get RBI's approval soon for its proposal to opene a full-fledged branch in Dubai. A representative office each in Honk Kong and China were also under consideration by the bank, he added.

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