Dena To Pare Asset Growth, Focus On Low-Risk Retail Loans

Dena Bank, which has seen its capital adequacy ratio (CAR) dipping to 7.7 per cent against the stipulated 9 per cent, has decided to pare its asset growth.

It will resort to 'selective' lending to borrowers, aggressively push bill discounting business and increase thrust on low-risk retail loans in a bid to come back into the black in fiscal 2001-02.

The bank posted a net loss of Rs 266 crore in 2000-01, thanks to fresh slippages of Rs 787.75 crore coupled with an outgo of Rs 107crore on account of the voluntary retirement scheme.

"A bank's 'dharma' is to mobilise deposits and lend. We will not stop lending and resort to narrow banking, whereby a bank is required to park all its resources in government securities only, due to our present CAR level. The bank will tackle the present situation by funnelling funds accruing to it by way of repayments of loans and recoveries of non-performing assets (NPA) into short-term and low-risk investments," A G Joshi, chairman and managing director, Dena Bank said.

 

Dena Bank has identified bill discounting business and short-term advances as focus areas that will boost commission income.

"The bank will be looking for enhanced turnover from bill discounting, which are short-term self-liquidating instruments with a tenor of less than a year. Income from this business will directly contribute to our bottomline without running the risk of impacting the CAR."

The bank has set a target of Rs 400 crore for effecting NPA recovery in 2001-02, employing various means at its disposal - normal/ compromise recovery and filing cases in the debt recovery tribunal. Its gross NPAs are pegged at Rs 1,900 crore.

It will also concentrate on pushing consumer/ housing loans and loans for retail traders. Loans extended in these areas are less prone to delinquencies and the risk is also spread out, Joshi said, adding that, prior to the retirement scheme outgo, the bank had a CAR of 9.6 per cent which compares favourably with the nine per cent stipulation.

On the merger of branches, he said: "We have merged 51 loss-making branches till date without causing any inconvenience to our customers. We will also merge three regional offices - two in Gujarat and one in Maharashtra - with the result that the number of such offices will come down to 19 in the next couple of months. This exercise is aimed at saving on costs."