The Hindu Business Line : Rs 4,000 cr in credit pipeline, Indian Bank turns to investments to raise resources

Chennai, Sept. 28 As the second quarter draws to a close, the question about Indian Bank is whether it would be able to repeat its first quarter performance, at least on two counts.

Buried in the sea of Q1 statistics were two figures – credit growth and fresh NPA.

The bank’s credit grew by Rs 4,000 crore during the quarter compared with Rs 800 crore in the corresponding quarter of last year. Its build-up of non-performing loans amounted to Rs 40 crore, compared with Rs 200 crore in Q1 last year.

Efforts with tech aid

These, according to the bank’s Chairman and Managing Director, Mr M.S. Sundara Rajan, were no accidents. They were the results of concerted efforts backed by technology. In that case, such performance ought to be sustainable.

Mr Sundara Rajan told Business Line last week that two initiatives, among others, were responsible for credit growth and control over NPAs. The first was the setting up of a “new business group” and another group to follow up with borrowers and find out why they had not availed themselves of loans to the full limit.

The new business group, set up last year, would fast-track credit disbursement process by giving an “in-principle approval” to the customer first. “The group gives in-principle approval for credit proposals worth Rs 300 crore each fortnight,” Mr Sundara Rajan said.

Credit game

In the pipeline are proposals worth Rs 4,000 crore. “Credit” is no problem; the challenge is in finding resources at viable costs to fund them.

Alongside the new business group, the other group ascertains which customers have not availed themselves of loans up to the limits — something that would not have been possible without the core banking software.

The second initiative was the creation of a “standard assets monitoring committee” to watch which borrower had skipped an instalment — again, entirely enabled by software. The committee would tell the respective branch manager to lean on the borrower and make him pay his dues.

Both the initiatives are sustainable and would manifest themselves in a similarly good show in the second quarter, says Mr Sundara Rajan.

Relatively better placed

The problem in the banking industry today is not of dearth of good lending opportunities, but that of finding the money to give loans. In this, according to the CMD, Indian Bank is relatively better placed, sitting on a pile of investments, thanks at least in part to the “rehabilitation bonds” that the Government had given it during its moribund days.

These bonds have now become eligible for trading.

As of March 31, 2008, Indian Bank’s investment book was Rs 21,300 crore. In the first quarter, it pulled out Rs 1,400 crore from this and used the money for giving loans. It has since pulled out another Rs 400 crore.