The Hindu Business Line : Indian Bank to shed Rs 2,000 cr of high-cost deposits

Indian Bank, a public sector bank, plans to shed high-cost deposits of about Rs 2,000 crore during the first quarter of the current fiscal, its Chairman and Managing Director, Mr M.S. Sundara Rajan, has said.

“Our endeavour would be to ensure that we don’t have any exposure to high-cost deposits in the coming days. We will come out of it this year. Repaying high-cost deposits will help protect my net interest margin,” Mr Rajan told a press conference here on Thursday.

Indian Bank’s high-cost deposits exposure stood at Rs 8,752 crore as on March 31, 2008. Of this, the bank has already repaid high-cost deposits of Rs 900 crore so far this quarter.

“We will repay Rs 1,100 crore by end June,” he said. The cost of such deposits ranged from 8.75 to 9.90 per cent.

Mr Sundara Rajan said that the RBI move to hike cash reserve ratio (CRR) by 75 basis points in April would impound about Rs 450 crore of resources and this would not yield any returns from the RBI.

On the strategy on interest rates following the CRR hike, Mr Rajan made it clear that it was for the asset liability committee (ALCO) to decide on whether to reduce the deposit rates or hike the advance rates.

“The ALCO will meet sometime next week to decide on the interest rates,” he told Business Line.

The Indian Bank CMD said that the bank had no immediate plans to raise fresh capital even as he noted that enough headroom was available on the Tier-II capital front.

On whether housing loan customers with loan value of up to Rs 30 lakh would benefit from the RBI move to lower risk weightage on home loans, he said that the ALCO would have to take a call on this issue. The total housing loan exposure of Indian Bank stood at Rs 4,188 crore.

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