Central Bank Sticky Assets Bloat Rs 800 Crore

Central Bank of India is likely to report a two-digit net profit figure of Rs 80 crore for the financial year ended March 31, 2001, due to fresh slippages in non-performing assets to the tune of Rs 800 crore during the year.

The bank had posted a net profit of Rs 150.68 crore in the preceding fiscal, 1999-2000.

Though the bank is expected to report an operating profit of around Rs 500 crore, provisions of about Rs 250 crore on account of NPAs, an outgo of Rs 125 crore due to the voluntary retirement scheme (VRS) introduced late last fiscal and other expenses relating to pension fund/ staff benefits will pull down the net profit substantially this year, analysts said.

 

Central Bank's net NPAs as on March 31, 2000, stood at Rs 2,843 crore and the bank will need to take a hard look at its burgeoning NPAs portfolio to stay in the pink of financial health, they pointed out.

Though a senior official of the bank was responsible for scripting a bad loan recovery policy, which has become a benchmark of sorts among the public sector banks (PSBs), the bank itself has not taken effective measures to implement it.

Other PSBs of similar size have tackled their NPAs more effectively, said sources.

Even as the objective of becoming lean has been achieved with 7,310 employees opting for the golden handshake, the bank will now have to focus on purging the balance sheet of the high level of bad loans, according to sources familiar with the developments in the bank.

Central Bank will amortise the VRS expenditure of about Rs 600 crore over five years. They pointed out that with the government planning to bring down its stakeholding in PSBs to 33 per cent, the bank will need to tap the capital market to raise resources.

For coming out with an inital public offer, Central Bank will have to take up recovery drive on a war footing, embrace the latest technology, close down unviable branches and get back on to the high profitablity gowth path.