Bharat Overseas In Commercial Banking Thrust

Private sector Bharat Overseas Bank has homed in on "commercial banking" as the niche segment that it would focus over the next eighteen months. The target segment of commercial banking would cover mainly traders, wholesale dealers, small scale industries and professionals.

Loans and advances ranging between Rs 25 lakh and Rs 3 crore are being categorised as part of commercial banking segment by the bank.

The bank chairman, G Krishna Murthy, told Business Standard that after internal discussions, the bank chose commercial banking as a thrust area. "We would like to increase the share of commercial banking to around 60 per cent of total advances in the next eighteen months, from the current level of 40 per cent," he said.

He said the interest rate charged would be 2 per cent more than the prime lending rate (PLR). PLR is the rate at which banks lend to their Triple A-rated customers.

Thus, the bank by ensuring a higher percentage of disbursement under commercial banking will be able to protect its profitability while facing competition from other big banks.

The bank's two other divisions- personal banking (covering loans upto Rs 25 lakh) and corporate banking (covering loans more than Rs 3 crore)- are expected to contribute 15 per cent and 20 per cent of the total advances, respectively, over the same time period.

Commenting on the bank's performance, Murthy said the operating profit (OP) for the current fiscal ending March 2002 was expected to rise by more than 40 per cent when compared with last year's operating profit of Rs 36.32 crore.

The OP was projected to increase mainly due to substantial increase in interest and non-interest income, which is projected to grow by more than 12 per cent and 30 per cent, respectively.

Murthy said that the huge increase in non-interest income was mainly due to increased money market operations and investment in government securities, with the bank investing 25 per cent more than the SLR.

During April-September 2001, the bank reported a 42 per cent increase in operating profit at Rs 21.91 crore as against Rs 15.40 crore during the corresponding period last fiscal. The net profit during the same period increased by 25 per cent to Rs 8.02 crore, up from Rs 6.41 crore in April-September 2000.