The board of directors of the Calcutta-based public sector Allahabad Bank are meeting in New Delhi today to discuss a reduction in the banks prime lending rate (PLR). The board will also take up the issue of reducing the rate of interest on the banks term deposits.
Allahabad Bank chairman and managing director, Harbhajan Singh, told Business Standard that the bank would pare its PLR by 50 basis points, from 15 per cent to 14.5 per cent.
This move to reduce its PLR by Allahabad Bank follows similar reductions by several other commercial banks, public, private and foreign, and by financial institutions. Among the other public sector banks which had reduced their PLRs are the State Bank of India, United Commercial (Uco) Bank, Punjab National Bank and Bank of Baroda.Amongst the development financial institutions, the Industrial Development Bank of India (IDBI) and the Industrial Credit and Investment Corporation of India (ICICI) have also slashed their lending rates.
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This spate of reduction in the PLRs of banks follows policy initiatives undertaken in the slack season credit policy of the Reserve Bank of India announced on April 15, 1997. The Calcutta-based bank, which had slipped into the red when the Reserve Bank introduced prudent accounting and provisioning norms made a turnaround last year when it chalked up a net profit of Rs 5.62 crore. This year, too, the banks top management is optimistic that the bank will be able to make a sizeable net profit.
Earlier this year, the bank received permission from the finance ministry to write back Rs 532 crore worth of accumulated losses against its equity. This meant that the banks balance sheet could be cleaned up in preparation of it approaching the capital markets for additional funds. Singh told Business Standard that the bank intended accessing the capital market for funds in 1998.
The bank has also added about Rs 132 crore to its Tier-II capital recently by a revaluation of its assets. In another instance of windfall gains, the banks merchant banking subsidiary, AllBank Finance, benefitted to the tune of about Rs 25 crore.