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Mr M.S. Sundara Rajan

Our Bureau

Chennai, July 21 Indian Bank has reported a higher net profit for the April-June quarter of the current year compared to the corresponding quarter last year, despite the fact that the bank had to provide substantially higher for depreciation of investments.

Indian Bank’s Chairman and Managing Director, Mr M.S. Sundara Rajan, told Business Line on Monday that the bank had to provide Rs 250 crore for depreciation in value of investments.

In the first quarter of last year, depreciation was around Rs 95 crore.

Following a conservative policy of transferring as much as regulation allows to ‘held to maturity’ category (like, indeed, most banks), Indian Bank transferred investments worth Rs 1,738 crore to HTM from ‘available for sale’. The bank has investments of Rs 19,936 crore, down from Rs 21,290 crore as at the end of last year.

Of this ‘non-SLR’ investments are about Rs 2,000 crore. Today, Indian Bank’s investments in SLR securities work out to 27.88 per cent of its deposits, against the statutory minimum of 25 per cent.

This statistic is significant because it indicates the bank has been pulling funds out of investments to give loans. Last year, after government of India gave ‘SLR status’ to the ‘recapitalisation bonds’, which the government had given the bank previously to strengthen its capital, Indian Bank ended up with SLR securities worth 36 per cent of its deposits.

That the drawdown from investments has been used to fund credit growth is evident from the rise in advances. Credit sanctions grew by Rs 4,000 crore in the quarter, compared to around Rs 800 crore in the corresponding quarter last year.

The reason is partly that the bank is now aggressively pursuing lending opportunities.

Mr Sundara Rajan said that the bank does not see any indication of a slowdown in the economy.

He said that the bank has credit proposals worth another Rs 4,000 crore in the pipeline. Demand for loans is from across the industry, but mainly from sugar, textiles, cement, power, telecommunications and road sectors.

There is no slowdown in enquiries for credit despite the bank raising its prime lending rate to 13.25 per cent from 12.50 per cent effective from July 1, he said.

The bank has fixed a target of 25 per cent for credit growth for the whole year. Last year, the bank’s advances book was about Rs 40,000 crore.

Indian Bank recovered Rs 114 crore from bad debts during the quarter, compared with Rs 97 crore in the corresponding quarter last year.

The bank is sitting on total recoverable bad loans worth Rs 1,400 crore (including written-off accounts). Mr Sundara Rajan expects recoveries to nourish the bank’s bottomline in the coming quarters.

More Stories on : Financial Performance | Public Sector Banks

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