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Indian Bank is expected to restructure a further Rs 1,157 crore worth of advances in the first quarter of the current year. Half of this is on account of its loans to the Rajasthan Electricity Board, an analyst report from Angel Broking has said.
In the last quarter of 2011-12, Indian Bank’s ‘restructured loans’ increased by Rs 3,330 crore to Rs 8,902 crore. The bank restructured loans worth Rs 800 crore given to Air India and Rs 1,200 crore to various companies in the power sector.
Even after restructuring loans worth Rs 3,330 crore, Indian Bank’s gross non- performing assets rose to Rs 1,851 crore, or 2 per cent of advances.
The report says a larger portion of loans have gone to SME and mid-corporate sectors, which contributed to the bank’s relatively high yield on advances (10.9 per cent). This, the report notes, is higher than banks that have much higher levels of low cost deposits than Indian Bank does.
“Past experience shows that banks that delivered high net interest margins on the back of high yields (on advances) have later paid the price for the higher risk taken, in the form of higher NPAs in the subsequent years,” it said.
The Indian Bank stock was trading 0.88 per cent lower at Rs 189 on the BSE in morning trade.
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