Allahabad Bank eyes 300% agri credit growth

Allahabad Bank intends to increase its exposure to agriculture credit by over 300 per cent as against the 30 per cent level set by the Union ministry of finance.

According to the chairman-cum-managing director of the bank O N Singh, Allahabad Bank was aiming at increasing its agriculture credit by over 300 per cent in the financial year 2004-05 to Rs 3,016 crore from Rs 848.24 crore.

Singh said the bank has a substantial exposure in the sector and has refined the model of farm lending to make it a profitable business.

"While the government wants a 30 per cent increase in the agriculture credit, Allahabad Bank has already lending 25 per cent more than its stipulated target for this sector," he said.

Banks are required to have 18 per cent of their total advances as agriculture credit. Given that there is saturation in the corporate sector, increasing exposure in agriculture can be a good recourse, Singh said. Moreover, this sector has a low rate of non-performing assets (NPAs) at five-six per cent, he said.

He said there were plans to disburse Rs 125 crore as agriculture credit in Vidarbha alone. Singh said farmers will get credit at differential of around 2 per cent after assessing their credit worthiness.

The bank is also aiming at bringing down its overall NPAs drastically to under one per cent and has embarked on a recovery drive, especially from corporate clients.

Corporate clients having long overdues will be asked to settle the loans by making a single upfront payment instead of continuing the account for years together.

The bank will be able to recover money through such kind of repayments, Singh said adding that it had almost finalised such deals for a couple of bad accounts.

At present the bank has been able to bring down the NPAs to Rs 850 crore from Rs 1,700 crore, he added.

With a total business level of Rs 52,000 crore, the bank has a credit to deposit ratio of 52 per cent. The bank will also come up with 250 automated teller machines by September 15.

In a move to consolidate its standing in the financial market and also increase spread, Allahabad Bank is also planning to acquire stakes in smaller banks.

Singh refused to divulge names of such banks, but said due diligence procedure had been set in motion.

The bank is also contemplating issuing bonds worth Rs 500 crore to shore up its capital base by tapping low-cost funds.

Allahabad Bank plans to open its first overseas bank in Hong Kong.

The decision has been cleared by the board and the proposal will now be put up before the Reserve Bank of India for approval, the bank's chairman-cum-managing director O N Singh said.

Hong Kong was selected for the first overseas branch as the bank found it could be tough to compete in developed countries and political uncertainties made it risky to operate in third world countries.