Central Bank's treasury income shrinks by 41%

Central Bank of India (CBI) faces fall in its income from its treasury operations. The bank plans to focus on core banking and para banking segment to supplement the fall in treasury operations as it expects further fall in its treasury income due to the hardening of the interest rates in future.

Talking to Business Standard, H A Daruwalla, chairperson & managing director of CBI, said, "The yield are hardening from treasury investment due to harding of interest rates".

She further said, "We need to develop other income source as the treasury incomes are coming down drastically".

The treasury income share in our gross income has come back to its previous years level, adds Daruwalla. The bank registered a drastic fall of 41 per cent in its profit from its treasury operation in the financial year 2005-06 compared to previous year.

The bank's profit from its treasury operation came down to Rs 532 crore in the FY 05-06 from Rs 900 crore in FY 04-05.

Bank has existing treasury operation corpus of Rs 27,000 crore out of which 10 percent is invested in government securities and balance in other avenues.

"With the hardening of interest rates we don't expect that there would be any major growth in the income from the treasury operations in future", she said.

Looking at the deem chances of improving the treasury income in future the bank has chalked out strategies to raise income from other fast growing segments.

Daruwalla said, the bank is now highly focused to develop core banking and para banking segment.

She further said, "We intend to utilise technology to the fullest for increasing our reach to the clients.

The bank will focus on the retail banking, agriculture, SSI and SMEs. Forex segment is one of the major thrust area where the bank intend to earn through volumes.

"Para banking is too on the card as there is high revenue generation scope", she adds. The bank will also be focusing on generating income from insurance, demate activities etc in the para banking segment.

Although the top management of the bank is not confident about higher income from treasury operations it has set of Rs 950 crore from its treasury operation for the FY 06-07.