Karnataka Bank, the Mangalore-based private sector lender, is restructuring its loans worth Rs 300-350 crore that is under stress.
The bank has already started receiving proposals from borrowers across sectors and a final decision will be taken by the asset liability committee which is meeting on May 2.
Ananthakrishna, Chairman, Karnataka Bank said, “We have identified certain sectors like real estate and textiles that are under stress and decided to restrict our exposure to borrowers in these sectors. We are studying the cash flow position and repayment capacity of borrowers in these sectors and rework repayment schedule for them.”
As per the guidelines of Reserve Bank of India, the bank will restructure loans under stress and the board will take a final call in this regard, Ananthakrishna said.
He said the bank intends to take sector-specific measures and may offer extension of repayment period by two more years for a 5-7 year loan account depending on the interest burden of each borrower and his repayment capacity.
Currently, 7 per cent of the bank’s total lending is towards real estate and another 15 per cent is towards textiles sectors and the bank has decided not to extend any fresh loans to them. As on March 31, 2009, the Karnataka Bank’s total advances stood at Rs 11,800 crore. Of this, 14 per cent is towards SME sector, 7 per cent real estate, 15 per cent textiles, 40 per cent priority sector and the balance towards corporate sectors.
In 2008-09, the bank reported a total business of Rs 32,000 crore, a growth of 14 per cent over the previous year. While the advances grew by 9 per cent to Rs 11,800 crore, the deposits grew by 17 per cent to Rs 20,200 crore over the previous year. Its net profit for the year ended March 2009 is likely to be up by 16 per cent to Rs 280 crore compared to the previous year.
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Ananthakrishna said the bank is looking at a growth of 20 per cent in its business to touch Rs 39,000 crore during 2009-10. The main focus areas for the bank this year will be retail credit, SMEs, infrastructure and capital goods sectors. The projected growth will be through internal accruals this year.
However, to maintain the capital adequacy ratio above 11 per cent, the bank needs to raise around Rs 200 crore during the second half of this year, he added. During the current year, the bank is also looking at increasing its branch network to 475 branches from the current 447 and add another 30 ATMs to reach a level of 200.