South Indian Bank Targets 10.22% Car

The Kerala-based South Indian Bank is aiming at a 10.22 per cent capital adequacy ratio (CAR) by the end of the current financial year.

This will be slightly more than the 9.4 per cent the bank enjoys now.

According to Maurice D'Souza, chairman of the bank, the bank will follow a policy of maintaining a CAR that is always a percentage or two more than the prescribed norm.

South Indian Bank is coming out with a public issue of 1.6 crore equity share of Rs 10 each for cash at a premium of Rs 22 per share aggregating Rs 51.20 crore. With this capital infusion, the current year's credit expansions can be taken care of. Any further capital infusion will be considered as and when the need arises, he explained. Next year, should credit off-take be low, the bank may decide on a small bond issue that will augment Tier II capital.

Already it has got shareholders' consent for increasing the authorised capital to Rs 100 crore.

Meanwhile, the bank has rescheduled loans for its textile clients in Coimbatore. This is inevitable, says D'Souza as they have been with the bank for more than 50 years. "We believe in retaining relationships, he said. The entire-textile belt in Coimbatore is going through its worst ever crisis and many units are reportedly on the verge of closure. These clients, says the chairman, are merely suffering from the economic slowdown and are unable to repay because of the genuine problems. "It is not a case of mismanagement or siphoning off of funds," he asserted.

The chairman, however, refused to quantify the loans that have been thus rescheduled but would only say that this pertained only to term loans and not working capital borrowings. Also, all these loans are backed by more than adequate securities and there is no danger of these loans turning fully bad and can be recovered. These provisions have been made simply to comply with RBI provisions regarding NPAs. From the bank's perspective, however, D'Souza did not believe the bad show by the textile industry in Coimbatore will have a major impact on the balance sheet as industry exposure has been pegged at around 8.28 per cent of the total loan portfolio.