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Bharat Overseas Bank capital recast after March

By K. T. Jagannathan

CHENNAI DEC. 14. Bharat Overseas Bank (BhOB) will wait for the financial year to end to take a view on the report submitted by SBI Caps on possible restructuring of its capital to facilitate the bank tap the emerging opportunities.

In an interaction with this correspondent, G. Krishna Murthy, Chairman of the bank, said though SBI Caps had submitted its report, the bank was in no hurry to take a decision on its recommendations. The bank, he explained, was at present implementing an IT (information technology) initiative at a cost of around Rs. 25 crores. He said the opportunity for booking high business volume could come once the IT initiative was in place. He expected these initiatives to result in at least 50 branches getting networked by September next.

At around 15.09 per cent, the capital adequacy ratio (CAR) of the bank was at a comfortable level at the moment, he said. The present business could be sustained with the existing capital and fund flow structure, he said. With the Basle II norms coming into force by 2005, requiring improved CAR prescription, the bank, he said, would have to necessarily look at augmenting the capital all the same. SBI Caps, he said, had made assorted sets of recommendations. Beefing up Tier II capital, possibility of a rights issue, flotation of an IPO were among the series of alternatives suggested by the consultant even as it detailed the merits and demerits of varied options.

The Chairman expected the customisation of the IT initiatives by March next year. He anticipated the initial products to roll out in the first quarter of the next financial year.

The Chairman indicated that the bank would install at least 25 ATMs (automatic teller machines) by the end of 2005. The bank, he said, had already opened up parleys with other banks for possible sharing of ATM infrastructure by paying transaction cost. To a question, he said the bank would position itself in the niche area of lending. In this context, he said the bank would target mid-cap firms for providing credit. Ideally, it would be comfortable lending between Rs. 15 lakhs and Rs. 3 crores. Mr. Krishna Murthy said the focus of the bank would be on providing credit to trade, commerce and service segments.

Notwithstanding this thrust, the bank, he said, would continue to serve corporates. He claimed that the bank had adequate retail products in its portfolio.

The Chairman indicated that the bank would soon start distributing insurance products as part of its efforts to beef up its non-fund based income. The bank was in talks with some insurance firms in this context, he said, declining to divulge details. On the recovery of non-performing assets, he said the bank had co-operated with genuine clients in helping to restructure their loans. In this context, the bank had appointed specialised officers in select cities to facilitate this process.

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