Global Trust Bank (GTB) has decided to bring down its exposure to the export sector to 25 per cent from the existing level of 35 per cent of total advances. In the case of GTB, export credit as a proportion of total advances has come down from 60 per cent in the first year of its operations.
The changes in the export credit refinance norms effected by the RBI has made lending to the export sector unattractive and hence GTB has cut back its advances to the gems and jewelleries. Over 75 per cent of GTBs advances is to the five industries -- gems and jewelry, software, engineering, textiles and pharmaceuticals. "Apart from the software industry, others are passing through a bad phase," said Ramesh Gelli, chairman and managing director, GTB. Commenting on the bank's allegedly soaring level of non performing assets (NPA), Gelli said that a provision of slightly in excess of Rs 5 crore has been made already. "Percentage wise, it forms roughly less than three per cent of the total exposure. Systematic efforts are on to bring down NPAs," he added.
He, however, denied reports that the bank has burnt its finger in the CRB fiasco and its bad loans to Videocon and Lloyds real estate divisions have proved costly for the bank. "Our total exposure to CRB is only Rs 2.2 crore, and we have made 100 per cent provision for that in as early as March.
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As far as Videocon is concerned, we have no exposure at all. And Lloyds has repaid a major portion of the loan advanced to it and around Rs 5-7 crore is yet to be repaid," Gelli said.
Talking about the business strategy, Gelli said that the thrust will be on branch expansion with respect to mobilising retail deposits and has fixed a deposit target of Rs 2,000 crore.
The bank is also planning to tap international markets for raising Tier II capital by issuing subordinated unsecured debt for $10 million and convertible bonds for $10 million.
As per the preliminary assessment carried out by GTB, it appears that they would be able to issue subordinate debt at 250 to 350 basis points over Libor and the FCCB at 175 to 225 basis points over Libor. The average tenor of the loan is expected to be seven years. On the other hand, Gelli said the decision to tap international markets has to weighed against raising domestic resources and the possibility of raising domestic Rupee debt if the interest rates decline from the current levels of 15.5 per cent to 16 per cent.
"We will issue long-term subordinated Rupee debt if long-term interest rates decline by 50 to 75 basis points," Gelli said.