An internal exercise by Corporation Bank to recast its balance sheet in line with the international format as accepted in Generally Accepted Accounting Principles (GAAP) has revealed that the move would reduce the bank's gross profit by about Rs 33 crore and net profit by about Rs 30 crore for fiscal 1997-98. For fiscal 1997-98, Corporation Bank had announced a net profit of Rs 167 crore, a rise of 33 per cent over the previous corresponding period.
"If we adopt all the requirements of GAAP and provide for 0.25 per cent on standard assets, the cumulative effect would reduce our gross profit and net profit in fiscal 1997-98. As a consequence, our capital adequacy gets reduced by only 0.9 per cent from 16.9 per cent to 16 per cent," R S Hugar, chairman and managing director of Corporation Bank said.
The move to follow GAAP accounting format will remain only an internal exercise and will not reflect in the balance sheet issued to shareholders in the annual report, Hugar said. In an event of the Reserve Bank of India deciding to make it mandatory for banks to follow the GAAP format, he said Corporation Bank would be already geared up for it. "We are prepared to adopt these international standards any time," he said. Besides, Corporation Bank plans to be more investor-friendly as far as the foreign institutions are concerned by going in for dual accounting practices.
"The GAAP exercise started by us in the current year is mainly to improve our international image as we have a high FII holding and to improve our efficiency," Hugar said. The FII holding in Corporation Bank is 15.21 per cent, while the government holds 68 per cent and the rest is held by the public. Hugar cautioned that in areas like demand deposits and credit deposit ratio, the bank will have to improve its position during the current year.
He expressed confidence of surpassing its targets for the current year. The bank, the chairman and managing director said, is likely to reach deposits level of Rs 13500 crore and advances level of Rs 7000 crore by March 1999, as against a business plan target of Rs 11000 crore and Rs 5280 crore respectively. Meanwhile, Corporation Bank has crossed the Rs 10,000-crore mark in deposits. For the five-month period ended August 1998, the bank grossed Rs 10,600 crore deposits, a rise of 40 per cent over the corresponding five-month period. The bank's advances also rose by 49 per cent to Rs 4350 crore during the five-month period ended August 1998.
