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Corporation Bank to seek more time to pare bulk deposits

Cites difficulties in reducing, as bulk deposits make up 40% of total deposits

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will seek more time from the finance ministry to reduce its bulk deposit base, its chairman and managing director Ajai Kumar said today.

"Our bulk deposit base is fairly high. It is close to 40% of our total deposits. Hence, it will be difficult for us to reduce it to 10% by March, 2013. We will ask for more time there is no other option," Kumar told reporters on the sidelines of a banking seminar organised by the Federation of Indian Chambers of Commerce and Industry (Ficci).

Earlier this month, the finance ministry directed banks to cap bulk deposits at 10% of total deposits by the end of this financial year. From 2013-14, the ceiling will be increased to 15% but will include (CD).

The move came after lenders led by government owned banks scrambled to mobilise these high cost deposits to finance their business growth. Industry players said it also reduced banks' ability to lower their lending rates as the cost of funds went up.

Kumar said usually term deposits of more than Rs 10 crore, where banks pay interest above the card rate, are considered as bulk deposits.

However, sometimes banks also classify deposits of more than Rs 1 crore as bulk deposits if there is a wide variation between the actual interest rate and card rate.

"This is a good direction and banks should not get into indiscriminate raising of funds. But we will need more time to comply," Kumar said.

Separately, he said the bank may need around Rs 1,600 crore capital in 2013-14 to meet its business needs.

"At present we are adequately capitalised. But we may need around Rs 1,600 crore beyond March, 2013 under severe conditions," he added.

The Mangalore-based bank closed last financial year with a capital adequacy ratio of 13%.

Kumar said while the bank was exploring different options to recover its loans to troubled Kingfisher Airlines, it has not initiated discussions with any company to sell these loans.

"We will like to recover our money back...It is difficult, there is not much collateral. So far, we have not found a buyer and not discussing it (sale of Kingfisher loans) with anyone," he added.

The bank has around Rs 160 crore loans outstanding with Kingfisher Airlines.

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