The Hindu Business Line : Indian Bank to use $100 m for overseas biz expansion

INDIAN Bank intends to use the $100 m it raised on Monday to augment the loan assets of its overseas branches at Colombo and Singapore, the bank's Chairman and Managing Director, Dr K.C. Chakrabarty, told Business Line on Wednesday.

The bank raised $100 m through its Colombo branch, at a rate of 22 basis points over LIBOR. Dr Chakrabarty sees the resource-raising effort as a successful test of confidence the international investor community has in Indian Bank.

With India having free trade agreements with both Sri Lanka and Singapore, commerce between India and the two countries would go up. Indian Bank would participate in the attendant demand for funds, Dr Chakrabarty said.

Singapore is the larger of the two overseas operations, with a loan book of about Rs 1,000 crore. Colombo is much smaller with about Rs 100 crore. Both put together, it works out to about $250 million. If the $100 m is disbursed in the current year (as is expected), Indian Bank's overseas lending could rise by about 40 per cent.

Hypothetically, even if the bank gets a spread of 50 basis points, it earns an additional Rs 5 crore.

Dr Chakrabarty, who has earlier worked as the head of the Bank of Baroda's London branch — which is in charge of all of BoB's overseas loan syndication operations — denied that he initiated the move in Indian Bank to raise resources abroad. He said that the proposal existed even before he joined the bank.

Asked about growth in advances in the current year, he said he anticipated an increase of about 15 per cent, but stressed that the bank would go in for only safe advances. He said that his immediate task was to set systems and processes straight, to ensure that the bad-loan problems of the past did not recur.

This, however, was not to mean that the bank was not interested in advances. Indeed, in an internal circular to the bank's staff, Dr Chakrabarty has stressed that targets undertaken by branches "are sacrosanct and must be achieved, come what may".

The circular exhorts the staff noting that if the branches "are taking only walk-in business, then growth will not be promising".

Asked if only safe advances would fetch profits, Dr Chakrabarty quipped: "We are sitting on a gold mine — the NPAs."

He said that since most of the NPAs had already been provided for, any recovery would only nourish the bottomline. Making profits, therefore, was not an issue at all.

Last year, the bank's net NPA recovery was of the order of Rs 100 crore. Dr Chakrabarty is confident that at least Rs 200 crore would be recovered this year.

He observed that property prices were going up and hence the borrowers were keen on settling their accounts and getting back their hypothecated assets.

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