Rbi To Vet Indian Bank Report Next Week

The Reserve Bank of India (RBI) would examine next week, the turnaround report of the controversy-ridden Indian Bank, prepared by the Investment Information and Credit Rating Agency (Icra).

Indian Bank, with mounting losses and controversies, had appointed Icra, a leading credit rating agency, to formulate a turnaround strategy at the instance of the RBI, whose consent was essential for adopting any of the suggestions.

Sources said Icra had finalised its report and made a presentation to the Indian Bank management and is likely to approach the finance ministry after the Reserve Bank makes its comments.

Next week, the top brass of the RBI, including governor, C Rangarajan is likely to examine the report prepared by Icra after it is finalised by the finance ministy. which is the major stake holder in the Chennai- based bank.

 

RBI governor, R V Gupta said that Indian Bank had already made one presentation on its `turnaround' strategy last year. "The turnaround depends on how the Indian Bank management alleviates the non performing assets (NPAs)," he said.

The deputy governor also added that the whole Indian Bank case was out in the open. Gupta's statement assumes significance in the light of the Reserve Bank's `overt' reservations against the repeated extensions given to former Indian Bank chairman M Gopalakrishnan under whose tenure the bank mounted its losses.

RBI sources said the apex bank had asked the Indian Bank to draft one more turnaround strategy by appointing an independent agency or a consultant.

Icra officials were tight-lipped on the report, saying that the rating agency was under an oath from the bank management not to divulge any details including the scope of the report.

"The turnaround strategy would be a continuous process and would keep evolving with the bank's progress," was all an

official had to say about the report.

Banking sources said the turnaround could be either by cutting overheads, or focusing on more fee-based business, like market intermediary activities and credit card business.

Sources also do not rule out recapitalisation of the bank or a merger with any leading public sector bank.

"The Punjab National Bank (PNB) had merged New Bank of India, a loss--making bank, with itself," a bank official pointed out, saying a public sector bank could also merge with the Indian Bank.

Despite rumours running rife in the banking circles, the Indian Bank management is eager to turnaround the loss making bank. With losses over Rs 1,200 crore, its net worth was totally wiped out after it made provisions for non-performing assets.

The Reserve Bank's inspection on the Indian Bank had pointed out many times to the bank management to make provisions for the non-performing assest, which the bank repeatedly ignored.

Bankers say that recapitalisation of the bank was a must to start business afresh, and a clearer picture was likely to emerge only after the Reserve Bank of India and the finance ministry examine the new turnaround strategy.

The Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED) are also probing into the alleged money laundering by the Indian Bank. ( PTI)

The turnaround depends on how the Indian Bank management alleviates the non-performing assets