Boi Plans Corporate Branches

A presentation of the restructuring reports was made yesterday to the RBI governor C Rangarajan by Coopers and Lybrand officials and G Kathuria, chairman and managing director, Bank of India.

The bank is also strengthening its treasury function as it is seen as crucial to the overall profitability of the banks. BoI has also drawn up an information technology plan to upgrade work technology and management information systems (MIS), as suggested by the management consultancy firm.

The report has pointed out the importance of management information systems, especially in the treasury functions of the bank.

It is felt that a strong MIS is required not only to make profits by also to avoid losses. Due to lack of MIS, BoI is known to take a very conservative treasury stance leading to losses or dent in potential profit.

 

One of the main problems of poor MIS vis-a-vis treasury function is that the head office which lends and borrows in the call money market does not have a clear picture of the demand and time liabilities of the branches spread all over the country. Hence, the bank tends to borrow from the call money market to maintain the cash reserve ratio(CRR) with the Reserve Bank.

However, it is later realised the demand and time liabilities position was lower now requiring the high CRR.

This essentially has two fallouts. Firstly, the interest paid on call money borrowings was not really req*uired. Secondly, the bank could, in fact, have lent in the market and generated income instead of incurring expenditure.

The idea behind corporate branches is to cater to large corporate accounts. These branches will not have the usual tier of clearance levels. In fact, State Bank of India was the first bank to set up specialised branches for top level corporates.