DCB slips into the red, NPAs at 6.8%

Development Credit Bank (DCB) has posted a net loss of Rs 163 crore for the year ended March 2005 against a profit of Rs 17.36 crore in 2003-04. "The loss is on account of provisioning," said Sandeep Mookerjee, head of personal financial services, DCB.

The private bank made credit provisions of around Rs 114 crore and provisions of Rs 45 crore towards depreciation of investments, he added. Net performing assets (NPA) to advances stood at 6.8 per cent as on March 31, 2005.

DCB proposes to write off NPAs in the current year. Recently the finance minister had instructed public banks to reduce their NPAs to 2 per cent. In the public sector domain, Dena Bank and Punjab & Sind Bank are the only two players whose NPAs are in excess of 5 per cent.

Reserve Bank of India (RBI) had earlier in March refused H V Seshadri, former managing director and chief executive officer, an extension, on the grounds of downplaying NPA figures through improper accounting.

"The bank is going through a major structural change in activities, and will come out with a public issue," said Iain Cheyne, director of Aga Khan Fund for Economic Development (Akfed) and DCB.

Akfed's infusion of around Rs 140 crore, helped the bank increase provisioning against legacy NPAs. The bank further proposes to raise around Rs 300 crore through an initial public offering (IPO) in the current fiscal, said banking sources.

As a part of its restructuring package, the bank had conducted a voluntary retirement scheme (VRS) in April 2005. Recently, the bank had terminated the appointment of around 40 management students.

"The bank is in a phase of restructuring and it was not possible for DCB to pay such fat salaries," said banking sources. The bank is trying to place these MBA students at other financial institutions, the source said.