Indian Bank may float subsidiary for NPA management

The public sector Indian bank, with a lot of expertise in the field of recovery of Non-Performing Assets (NPAs), is exploring the possibility of floating a subsidiary for undertaking NPA management.

This is proposed to be a wholly owned subsidiary and a partner may be roped in later. However, the parent bank will take care of the recovery of its own NPAs which is pegged at about 0.87 percent of the gross advances.

The proposal is in nascent stage and more time will be required for firming it up. The bank will seek the approval of the board after the plan is firmed up, said M.S. Sundara Rajan, chairman-managing director (CMD) of Indian Bank.

“The Indian Bank has maximum expertise in the field of NPA recovery and we are exploring the possibility of setting up of a wholly owned subsidiary to purchase NPAs from the banking sector”, Sundara Rajan, who is on a two-day tour to Orissa, said.

Indian Bank, which has the second lowest NPA among the public sector banks, sees business opportunities in the NPA recovery area.

Further, to make cheap credit available to the beneficiaries, the bank has stipulated that the micro-finance institutions (MFIs) can charge maximum 5 percent interest higher than the rate which is charged by the bank to MFIs. The bank, which has micro-credit exposure of Rs 1700 crore, gives 93 percent of the credit directly to the beneficiaries while routing the rest only 7 percent through the MFIs.

Targeting a overall business of Rs 1,50,000 crore by March 2010, the bank will focus on augmenting credit flow to agriculture and agro-processing, self-help groups (SHGs), educational sector, industrial advances including loans to micro, small and medium enterprises (MSMEs). Besides, gold loan both in the agriculture and non-agriculture sector will also be expanded.

As part of its branch expansion plan, the bank added 101 branches last fiscal and has so far added 50 branches during the current fiscal. Fifty more branches are proposed to be opened during the remaining months of the current fiscal which will take its total number of branches in the country to 1750 by March 2010. It has a network of 1700 branches at present.

Similarly, the bank has chalked out plans to open 150-160 ATMs during 2009-10 to cross 1000 mark by March 2010. Sundara Rajan said, the bank has a capital adequacy ratio (CAR) of 14 percent with the tier-I capital being 12 percent. So there is no need to infuse more capital till 2010-11, he added.

He said, the bank will continue to recruit people for specialised operations like treasury, agriculture, international division among others.

The bank takes in 100 to 150 new employees every year and this will continue this fiscal as well.