IOB hopes to retain Bharat Overseas stake

IOB's net up 26%

Indian Overseas Bank is hoping that the Reserve Bank of India (RBI) will make a deviation from the rules and allow it to retain its 30 per cent stake in Bharat Overseas Bank.

"We will depute a representative to the apex bank to urge it to treat us as a special case," S C Gupta, chairman, Indian Overseas Bank told Business Standard.

"We will be reviewing the situation in a few days before sending out our emissary," he added.

"There is not much that we can gain from selling our stake, so we do not see the need to do so," he further pointed out. The draft proposals of the Reserve Bank of India (RBI) restrict the stake of a private bank in another bank to 5 per cent.

Presenting the bank's results to the media, Gupta noted that the bank saw its net profit climb by 26 per cent in the first quarter of the current year. The net profit went up to Rs 174.60 crore as against Rs 138.78 crore in the corresponding quarter last year.

Its operating profit is up 29 per cent at Rs 352.33 crore (Rs 272.54 crore). Interest earnings during the quarter was up at Rs 970.71 crore (Rs 929.55 crore). Interest payments declined to Rs 533.63 crore (Rs 564.22 crore).

The net interest income rose by 20 per cent to Rs 437.08 crore (Rs 365.33 crore). The net interest margin has climbed to 3.63 per cent (3.58 per cent).

Total deposits in India and abroad increased to Rs 41,297 crore (Rs 37,083 crore). Net advances improved to Rs 21,322 crore (Rs 18,179 crore). At the close of the quarted the bank's credit-deposit ratio was at 51.15 per cent. The bank has raised the quantum of its low cost deposits to 34 per cent (27 per cent in March 2000) of its deposit base.

The bank which recently raise its Tier-II capital finds itself comfortably positioned in terms of capital with its capital adequacy at 12.70 per cent (12.49 per cent in March 2004).

The bank which is working towards bring its net non-performing assets (NPAs) down to less than one per cent by 2006, found its net NPA at 2.37 per cent at the close of the first quarter. The quarter saw a recovery of Rs 56.40 crore.

Gupta pointed out that with 37 per cent of its branches in the rural areas, rural banking continues to be one of its strengths. Priority sector advances of the bank stood at Rs 8,638 crore, comprising 46 per cent of its net credit.

The bank takes pride in its implementation of core-banking solutions at costs far lower than the industry average. The bank is spending between Rs 8 crore and Rs 10 core, in this direction, which Gupta highlights is almost 20 per cent of what some of the other banks are spending on their outsourced solutions.