The Hindu Business Line : Bank of India on consolidation course

BANK of India has decided on a course of consolidation and keeps its options open for expansion both in the domestic and overseas markets, according to its Chairman and Managing Director, Mr M. Balachandran.

The bank has already initiated the process of sensitising its staff on the need for consolidation through mergers and acquisitions, the CMD told newspersons here on Wednesday.

In view of its expansion plans, the bank is currently evaluating options for strengthening its capital adequacy ratio (CAR) through raising either tier-I or tier-II capital and is also awaiting the Reserve Bank of India norms on tier-III capital issue, he said.

The CAR of BoI stands at 11.40 per cent as at the end of September 2005, consisting of 6.97 per cent of tier-I capital and 4.43 per cent of tier-II capital. The bank is currently comfortable with its CAR level. Though it can raise substantial amounts through issue of subordinated debt under tier-II capital, it has decided to keep options open for raising tier-I capital as well, while awaiting clarity over tier-III capital, Mr Balachandran said.

BoI, which currently has 23 branches across the globe, proposes to set up five more overseas branches. Towards this, the bank is considering various options that include upgrading the existing representative offices in certain countries towards full-fledged branches, opening of new branches and acquiring banking operations of other banks. In the domestic market, the bank plans to open 45 branches in the next two years, taking the total branch network to around 2,650. The bank has earmarked funds of around $100 million for its overseas expansion plans.

The bank has set a target of achieving at least 15 per cent growth in deposits and around 23 per cent in advances during the current fiscal. For the first half of the current fiscal, the bank's total business stood at Rs 1.48 lakh crore, recording year-on-year growth of 16.36 per cent. According to Mr Balachandran, the bank has also set a target of bringing down its gross non-performing assets (NPAs) to around three per cent and net NPAs to around 1.5 per cent by March 2006 from the current level of 4.59 per cent and 2.23 per cent, respectively.

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