Indian Bank eyes right price for NPA sell-off

Indian Bank will take a decision on selling some of its sticky assets to Asset Reconstruction Co of India Ltd. if the latter offers a suitable price at a meeting in this connection on Tuesday, Chairman and Managing Director M S Sundara Rajan said today.

"We have book (gross) NPA (non-performing assets) of Rs 546 crores (Rs 5.46 billion) and net NPA of Rs 85 crore (Rs 850 million) as of June-end. My endeavour will be to recover as much as I can," Rajan told in an interview.

"We also have a memorandum of interest of Rs 14,000 crore (Rs 140 billion). Memorandum of interest is when interest is not charged on the ledger, but in a separate account." 

THE BALANCESHEET
(Rs crore)	'05-06	'06-07	% chg
Deposits	40,806	47,091	15.40
Advances	22,485	29,058	29.24
Total Income	3,828	5,018	31.09
Net Profit	504	760	50.60
Gross NPA	669	546	-18.41
Net NPA	177	102	-42.19
Net NPA to	0.79	0.35
Net Advances (%)
CAR (%)	13.19	14.14

Indian Bank has not yet decided on the price it will seek from ARCIL for selling the NPAs, Rajan said.

Earlier, there were reports that the bank has cancelled its plan of selling the NPAs, as recovering them on its own would be more profitable.

After coming out with an initial public offer of equity in February for Rs 86 crore , the government-owned bank is likely to raise capital through a follow-on public issue or via Tier-II bond issue in 2009, Rajan said.

"We have diluted only 20 per cent of government stake. We have two options, one is an FPO (follow-on public offer) and another to leverage on Tier-II capital," Rajan said, adding the capital raising plan would be decided depending on the need for resources in 2009.

The issue price of the bank's IPO was Rs 91 a share.

Today, the bank's shares ended at Rs 163.50 on the National Stock Exchange, up 2.96 per cent from Friday's close. "At the moment, we have to utilise the capital raised recently to step up quality credit and to protect our net interest margin," Rajan said.

The bank wants to expand its credit-deposit ratio from the present 59 per cent, compared with the industry average of 72 per cent, he said.

Farm credit and loans to small and medium-term enterprises will remain core areas for the state-owned bank, Rajan said.

"In June, our credit to farm was 18 per cent and we are aiming to move towards 20 per cent in the current financial year."

The bank's prime lending rate is 12.5 per cent, and there are no plans to reduce lending rates, Rajan said.

"We are already offering low rates, so there are no plans to cut them."

The bank is aiming at a credit growth of 25 per cent for 2007-08, slightly lower than 29 per cent in the previous financial year. Rajan plans to maintain NIM between 3.4 and 3.6 per cent in 2007-08. The bank's NIM in 2006-07 was 3.6 per cent.

The bank does not aim to increase its bulk deposits, Rajan said.

"We had bulk deposits of Rs 7,000 crore (Rs 70 billion) as of March and plan to maintain the same this year also," he said.

"We do not want to pay high cost and want to keep (bulk) deposits under control."

Indian Bank has not received any proposal for a takeover by another bank nor does it plan to pick up a stake in a private bank, Rajan said.

"Let me make myself stable before looking out," he said. "We are also not planning any mergers with other banks."

The bank wants to strengthen its organic growth and then take a look at inorganic growth, he added.