The Hindu Business Line : Bank of Maharashtra sees positive impact of Basel-II

Chennai, Aug. 18 Bank of Maharashtra’s capital adequacy ratio stood at 12.03 per cent as at end-June 2007. If the bank were to calculate its capital adequacy on the basis of Basel-II, it would work out to 13.02 per cent.

This is because a considerable portion of the bank’s loan portfolio is made up of loans to ‘triple A’ rated corporates, for which the risk weights for capital charge is only 20 per cent.

What this means is, Bank of Maharashtra (in which the government’s holding is 77 per cent and hence has substantial scope for dilution) will not come out with a follow-on public issue either this year or next, and perhaps even after two years.

This is more so because only last month the bank raised Rs 200 crore of Tier-II capital and another Rs 225 crore through perpetual bonds. It still has headroom for raising another Rs 200 crore of Tier-II capital.

In a chat with journalists here on Friday, the bank’s Chairman and Managing Director, Mr M.D. Mallya, stated that the bank faced no capital pressure. For example, its home loan portfolio is about Rs 2,300 crore and growing at 30 per cent. Over 85 per cent of this comprises small-sized loans which attract a risk weight of 50 per cent.

Net profit up

Bank of Maharashtra made a net profit of Rs 82 crore in the first quarter of the current year, against Rs 61 crore in the same quarter last year — a rise of 34 per cent. Mr Mallya said the bank’s profitability would go up further, because with more and more branches coming under ‘core banking’, its ability to raise low-cost CASA deposits would grow.

CASA deposits

Even at present, Bank of Maharashtra is among banks with very high CASA component. Current account and savings account deposits account for 41.3 per cent of the bank’s Rs 34,250-crore deposits.

Today, only 212 of the bank’s 1,360 branches are under CBS. An IT initiative is under way to computerise the 500-odd rural and semi-urban branches, to ready them for upgradation to CBS branches.

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