IMD, VRS expenses eat into SBI's profit

By Our Staff Reporter

KOLKATA, JUNE 21. State Bank of India will set up a 60:40 joint venture with Canara Bank to open branches in Russia. According to the SBI chairman, Mr. Janki Vallabh, the detailed equity structure of the joint venture is to be finalised in tandem with the regulations of the foreign country. Mr. Vallabh was speaking to media persons after announcing the annual results for 2000-01.

The bank has ended the last fiscal with a 22 per cent drop in its profit after tax to Rs. 1,604 crores from Rs. 2,051 crores in 1999-2000. The net profit would have surged to Rs. 2,160 crores had the India Millennium Deposit issue expenses of Rs. 443 crores and the VRS related expenditure of Rs. 853 crores had not been charged to the profit and loss account. The operating profit was Rs. 3,966 crores.

The bank raised $5,479 million from the IMD at an annualised cost of 9 per cent, of which 40 per cent ``was parked with the Centre at a yield of 10.5 per cent'' and 50 per cent was lent to associate banks at 10 per cent. The total expenditure on separating 10 per cent of the manpower has worked out to Rs. 2,270 crores to be adjusted in the balance sheet over the years.

Net interest income was Rs. 8,247 crores, 19 per cent higher than that of the previous year. The average level of advances in India was higher by 21.9 per cent and resources deployed in treasury operations by 19 per cent.

Net interest margin was marginally higher at 3.18 per cent against 3.16 per cent. Non-interest income grew by 12.5 per cent to Rs. 4,017 crores. Income from forex operations was down by Rs. 20 crores. The profit from overseas operations was up by 18 per cent at Rs. 270 crores. Operating expenses, before reckoning IMD issue and VRS expenses, registered a rise of 11.24 per cent. Income tax claimed Rs. 971 crores.

A total of Rs. 1,432 crores was provided for assets considered substandard or non-performing as per the revised Reserve Bank of India guidelines. Though the RBI allowed banks to provide for the same in two consecutive years, SBI had made full provision for the same in 2000-01. Net NPA on net advances came down to 6.03 per cent from 6.41 per cent.

Evading queries on the performance and prospects of SBI subsidiaries, Mr. Vallabh could only say that ``the bank had prepared an approach paper on the same and no drastic action is expected in the short term''. About SBI Home Finance, he claimed that the subsidiary had proved to be an effective vehicle especially in the Eastern and North Eastern regions.

The management is yet to set any high target for SBI Life, the insurance venture, till the laws of the land are amended to enable SBI branches sell the products. ``We would like to collect Rs. 100 crores of premium in the current fiscal'', he said.

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