The Hindu Business Line : Indian Bank keen to expand in East Asia

He was in Singapore in connection with the signing of an agreement for $100-million syndicated borrowing by the bank's Foreign Currency Banking Unit (FCBU), Colombo. He also inaugurated Internet banking facility at the Singapore branch and presided over the launch of a new remittance service in taka, Bangladesh currency, under a tie-up with Sonali Bank. Excerpts from the interview to Business Line:

How does Indian Bank compare with the world-class banks?

Our credit growth last year was 27.85 per cent, and year-on-year June 2004-05, it is maintained at the same level. Return on assets is 1.08 per cent. Anything above one per cent is internationally comparable. Our capital adequacy ratio is over 14 per cent. Nine per cent is a Basel requirement.

Return on networth is about 24 per cent, which is well above the international benchmark.

The bank is doing pretty well. The pressing problems that we had are behind us.

In 2005 March, our gross profit was up by about 24-25 per cent and our net profit was also up, by about 17-18 per cent.

Our net non-performing assets (NPA), one of the major issues that we could resolve in the last couple of years, is only 1.35 per cent.

As per June 2005 provisional figures, it is around 1.1 per cent, which is nearly the international benchmark and much lower than that of banks in many developed countries.

The industry average for net NPA, in India, is between 2.5 per cent and 3 per cent, and ours is much less than that. Before we celebrate our centenary in 2007, we want to bring it down to near-zero level.

What is this new loan agreement about?

It is a one-year syndicated borrowing with funds committed by nine banks.

It is Libor-based with an interest spread of 22 basis points (excluding other costs), which is a very fine rate. This is raised by our Colombo branch and intended for the global use of the bank. It is not a one-to-one kind of deal. This demonstrates broad-based appetite of international banks/investors for Indian risk in general, and Indian Bank in particular.

The funds will be used largely for expanding the loan book.

There is no corporate-specific conditionality, restricting usage of these funds.

After more than a decade, we have re-entered the market. Singapore was chosen as the venue for the signing ceremony for the sake of convenience of the bank representatives.

Is it an adequate sum for your profile at the moment and for your projected plans?

As and when we need, we may revisit the market for foreign currency. Though the new facility is basically a borrowing by FCBU Colombo, it would be used for whichever operations of the bank that require funds. It will be monitored by our international division. The cost of borrowing is on par with that of the other banks in India. Maybe, a difference of one or two basis points either way.

Will this borrowing raise Indian Bank's profile internationally?

Yes. Not enough.

Are you planning to float any bonds internationally?

Not at this stage.

Can the new borrowing serve as a spring-board for the bond scheme?

Yes.

With India and Singapore having signed the Comprehensive Economic Cooperation Agreement , the banking sector is one of the prime areas of potential new activity? Is Indian Bank going to expand in Singapore?

Definitely. We are already a `Full Licensed Bank'. If we are awarded `Qualified Full Banking' status, it will give us a better access to the retail and personal banking segment, thereby enabling the bank to enhance its market share.

At the broader level, this cooperation agreement will improve the trade flows between the two countries. Our bank can act as facilitators.

We have an active trade finance portfolio in Singapore branch, with over 200 clients dealing with India and other countries. We are here for the past 64 years. We have very good infrastructure, expertise and staff who are well familiar with market conditions.

What are Indian Bank's plans in East Asia?

Quite bullish. We would like to expand our operations in this part of the world. We are seriously exploring the possibility of having a presence in Indonesia/Vietnam, through a representative office, a branch in Hong Kong and may be a representative office in West Asia as well. It could take at least six to seven months to open representative offices. Opening a full-fledged branch in Hong Kong will take more time. In the past, we had some presence there. So, it is not difficult to re-establish a clientele base in Hong Kong.

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