Vrs, Bad Loan Provision To Pull Dena Bank Into The Red

Dena Bank is set to repeat its dismal performance recorded during fiscal 1993 and 1994 and post a net loss in fiscal 2001 after a gap of six years again.

Rising provisioning requirement on account of ballooning non-performing assets (NPAs) as well as the expenses of the voluntary retirement scheme (VRS) -- which has seen about 25 per cent of Dena Bank employees opting for it-- will hit the bottomline out of the bank.

In 1993, the bank had posted a net loss of Rs 90 crore and in 1994 the figure was Rs 69 crore. This time, the net loss could be even more, analysts said. In the third quarter of the last fiscal (October-December, 2000), Dena Bank posted a loss of Rs 6.9 crore.

In 1999-2000, the bank recorded a 43 per cent fall in net profit at Rs 62.87 crore compared with Rs 110.09 crore in the previous year.

Under the VRS, the bank severed ties with 3,378 employees at an estimated cost of Rs 450 crore. Of this, Rs 270 crore of expenditure was incurred due to ex-gratia payments and Rs 180 crore on account of leave travel concession, leave encashment and medical reimbursement.

The bank will be required to make full provision towards the statutory dues while the ex-gratia payment can be amortised over five years. In effect, it will be required to make a provisioning of over Rs 225 crore on this account.

During the year, bank's NPAs also went up by over Rs 400 crore. In fiscal 2000, it had added over Rs 800 crore worth of sticky loans raising its net NPA level to 13.47 per cent from 7.67 per cent previously. It is set to go up further.

The bank has launched a cost-cutting drive. It is in the process of closing down some of its regional offices. It has also decided to close down or merge about 60 branches across the country.