Global consultants to prepare roadmap for Nedungadi Bank

By Our Special Correspondent

CHENNAI, FEB. 5. The 100-year-old Kerala-based Nedungadi Bank has short-listed three global consultants to undertake a SWOT (strength, weakness, opportunity and threat) analysis and prepare a road map for the bank, taking into account the global banking scenario.

The Chairman of the bank, Mr. A. R. Moorthy, said, ``the outside consultant will make a detailed analysis as to where we will go five years hence.'' Asserting that ``we don't want to do things on a piecemeal basis,'' he indicated that his bank would rather go in for total `revamp and re-engineering' of the organisation.

The consultant is expected to look into the entire gamut of possibilities and indicate the future options available for the bank. The short list contains known names in the consultancy business like KPMG, A.F. Ferguson and PriceWaterhouseCoopers (PwC). The bank will make up its mind on the consultant soon.

With 163 branches spread across the country, the Kerala-based bank, according to Mr. Moorthy, ``is now identifying gaps in its network''. Making it clear that his bank was, in fact, keen on expanding, the Chairman, nonetheless, asserted ``we will do it selectively wherever it is viable to do so''. In this context, he hinted that Nedungadi Bank would go to places where it could get `low cost deposits' (like market places). Mr. Moorthy was obviously aware of the increasing difficulty in accessing low cost funds in view of the fact that interest-conscious depositors have moved away from banks and are, of late, heading towards mutual funds and the like.

Banks in Kerala face a peculiar problem in that much of their deposits are long-term in nature and are primarily from non- resident Indians (NRIs). ``At one time the NRI deposits cost us 17-18 per cent,'' Mr. Moorthy said. Since then this had come down. Nevertheless, the average cost of deposits for Nedungadi Bank works out to around 9.58 per cent. In Mr. Moorthy's reckoning, even this was on the high side. The fixed deposit component in total deposit was 78 per cent. This should not be more than 60 per cent, he added.

With private banks not in a privileged position vis-`-vis procuring deposits of public sector undertakings (PSUs), Mr. Moorthy saw hard times ahead for these banks.

Faced with high cost of deposits, on the one hand, and clamour from the corporates for a cut in lending rates, institutions like Nedungadi Bank are facing pressure on margins. In this context, he said managing `the spread' had become crucial to the bank.

The bank, in the meantime, has signed a memorandum of understanding with Stock Holding Corporation of India Ltd to launch a loan scheme christened Shathabdi Share Loan Scheme.

Under the scheme, it will lend against demat shares. The loan will bear an interest charge of 16.5 per cent (plus interest tax) and will be for a 12-month period. The ceiling on the loan is Rs. 10 lakhs.

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Section  : Business
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