Top officials of the Industrial Development Bank of India (IDBI) met over the weekend to finalise the institution's plan for the current year (2001-02). The financial institution plans to cut down its non performing assets, concentrate on profitability maximisation and to diversify into new areas.
The institution plans to stop any incremental increase in the NPAs for the current year. It also wants to cut down the NPAs by three to four percentage points this year. The net NPAs of the FI had increased from 13.4 per cent in March 2000 to 14.8 per cent at the end of the year 2000-01.
In absolute terms, the net NPAs increased from Rs 7675 crore to Rs 8,370 crore between the two years. However, officials admitted that though cutting down NPAs by three to four percentage points is a tall order, an attempt could still be made to avoid any incremental NPAs.
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Branches and zonal offices have also be given the mandate to take all possible steps to cut down NPAs as also to avoid buildup of new NPAs. The institution will also concentrate on getting out of smaller projects and tap only top corporates so as to stop any increase in NPAs. In addition, the FI is also planning to increase the minimum assistance level from Rs 5 crore to Rs 10 crore.
In a major change in its strategy, the FI is also going to focus more on medium-term corporate funding than project financing. This would also help the FI to increase its asset book which had in the previous fiscal shown a decline. The asset book of the institution during the fiscal 2001 had shrunk by 0.7 per cent to Rs 71,783 crore, down from Rs 72,285 crore at the end of March 2000.
IDBI is also looking at getting into new areas like construction finance and housing finance which are more profitable for the organisation. However, this could take some time. Officials added that even on housing finance there are many corporates which are already in the field and these plans are more of retail.
However, on the positive side, the ratio of NPAs are quite low on the retail side. The institution is waiting for the Boston Consulting Group report on the road map to universal banking before it decides on which areas to foray.