North Block clean chit to Centurion before rights

The finance ministry has given a clean chit to Centurion Bank just before its proposed rights issue of Rs 90.8 crore slated by the end of this month.

"There is no problem with Centurion Bank," finance secretary D C Gupta told PTI here. Although there have been complaints on the operations of some banks including Global Trust Bank, Gupta said overall the private banks are doing well in the country.

Centurion Bank chairman Rana Talwar said, "The bank is in great shape, the balance sheet has been cleaned up, business growth has been good and more capital is coming into the bank."

After Talwar, the former Standard Chartered Bank plc chief, took over reins of the erstwhile ailing bank, foreign investors infused Rs 154 crore in Centurion Bank. The shareholding of foreign investors in the bank has gone up to 70 per cent.

The main strategic investor Bank of Muscat holds 33 per cent, while Keppel has 15 per cent, Talwar's Sabre Capital 7-8 per cent and Asian Development Bank 4.0 per cent.

Centurion Bank also raised Rs 43 crore in the form of Tier-II capital in June. Talwar said the bank would raise another Rs 90.8 crore through a rights issue by the end of this month, which would take its capital adequacy ratio to more than 10 per cent and further strengthen the financial strength of Centurion Bank.

Centurion Bank managing director Shailendra Bhandari said the best part of the bank was that 80 per cent of its assets was retail portfolio, which is growing by 50 per cent.

In a bid to strengthen the financial strength, Bhandari said the bank has reduced its deposit rates while keeping the retail lending rates same.

The cost of borrowing has come down drastically from 7.9 per cent in March 2003 to 6.3 per cent in March 2004 and further to 5.6 per cent in June 2004, he said.

This, in turn, has raised the spread between the cost of lending and the cost of borrowing of Centurion Bank to 3.7 per cent, which is perhaps the best in the industry, he said.

The bank has made huge provisions for its bad assets and reduced its net non-performing assets to 4 per cent in June 2004. "We aim to reduce non-performing assets further to less than 3 per cent by the end of this fiscal," Bhandari said.

Satisfied with the financial health of the bank, the RBI has granted it licence for opening up 14 more branches in the country.

Bhandari said the bank is on an expansion drive and would open branches in smaller cities and towns like Raipur, Udaipur, Gandhidham, Jabalpur, Salem, Mangalore, Madurai and Kolhapur in this fiscal.

"We are in the process of building a top quality bank with an excellent risk management system and offering good quality service. Depositors should be satisfied as their money is safe," he added.