IDBI net drops 6% in Sept qtr

Industrial Development Bank of India (IDBI) closed its books as a development financial institution with a 6.25 per cent drop in net profit to Rs 117 crore in the July-September 2004 quarter from Rs 125 crore in the corresponding quarter a year ago.

The decline in net profit was on account of a 11.10 per cent fall in income to Rs 1,529 crore during the quarter from Rs 1,720 crore.

IDBI, which converted itself into a bank under the Companies Act from with effect from October 1, reported a net profit of Rs 465 crore for the extended 18-month accounting period ended September 30, 2004, on Rs 9,704 crore of income from operations.

IDBI made an adhoc accelerated provision of Rs 1,500 to prepare for any deficiency in value of assets on account of its conversion into a banking entity.

IDBI chairman M Damodaran told reporters today the accelerated provision was done proactively to provide for unforeseen deficiency in the assets as IDBI had enough reserves. This provisioning was over and above Rs 1,692 crore provided for bad and doubtful debts and investments for the 18-month accounting period.

IDBI also cleaned up its balance sheet by transferring Rs 1,000 crore of assets to Stressed Assets Stabilisation Fund (SASF), from the Rs 9,000 crore stressed assets identified, which helped IDBI bring down its net non-performing assets to 2.4 per cent as on September 30, 2004 from 14.2 per cent in March 31, 2003. IDBI's net NPAs as on September 30, 2004 were Rs 881.89 crore.

IDBI retired high-cost liabilirites of about Rs 3,500 crore during April-September and plans to retire upto Rs 2,500 crore more by March 31, 2005. The borrowings retired in the current year carried interest rate of 12 per cent and more.

In 2005-06, the bank plans to retire upto Rs 8,000 crore more of high cost borrowings, IDBI executive director O V Bundellu said. Bundellu said IDBI paid Rs 2,300 crore to the Reserve Bank of India (RBI) on October one, the day it converted itself into a bank, to meet its cash reserve ratio (CRR) requirements.

Damodaran said IDBI's average cost of funds was around 9 per cent, while incremental cost of funds was lower at around 6 per cent. With IDBI attaining the ability to compete with other banks in the pricing of loans, "big ticket" credit proposals have started flowing back to the bank.

From now on the sanctions book will have new proposals worth about Rs 1,000 crore every week. The flow of proposals has made the credit committee to meet at an increased frequency of once every week. IDBI's capital adequacy ratio as on September 30, 2004 was 18.5 per cent, of which Tier I worked out to 15.2 per cent.