Visakhapatnam Co-op Bank net up 7% last fiscal

Despite a steep fall in deposits, Visakhapatnam Co-operative Bank Limited (VCB) "� the second largest co-operative bank in terms of deposits in the state "� registered a modest growth of seven per cent in net profits during 2003-04.

The bank earned a net profit of Rs 4.03 crore during the last fiscal, as compared to Rs 3.76 crore in 2002-03, thus registering a growth of seven per cent.

However, the bank's deposits had fallen to Rs 208 crore by March 2004, as compared to Rs 269 crore by the end of March 2003, thus recording a fall of around 23 per cent.

Speaking to Business Standard, VCB chairman Manam Anjaneyulu said, "In September 2003, our customers withdrew close to Rs 40-45 crore from the bank in a span of five to seven days, due to widespread negative rumours against our bank. This resulted in a steep fall in deposits. Another reason for the downtrend is because more depositors are now preferring to invest their money in real estate instead of putting it in fixed deposits for meagre interest rates," he added.

"The bank has, however, saved some interest burden due to the withdrawal of premature deposits. Also, fuelled by the rumours, most of the gold loan customers paid their long-pending gold loan amounts with interests and took away their gold. This has actually resulted in a slight increase in profits," he said.

Keeping the September incidents in mind, the bank decided to increase its reserves as much as possible, particularly for the financial year 2003-04. The bank's governing body decided to divert the Rs 12 crore surplus amounts to reserve funds.

"By March 2003, our reserves were Rs 20 crore. By March 2004, the reserves were raised to Rs 32 crore. To mop up the reserve fund and to meet the RBI norms, we have reduced the dividends during this year," Anjaneyulu said.

"In 2002-03, VCB paid a dividend of 27 per cent (21 per cent dividend and six per cent interest on share capital) to its 23,000 shareholders. For 2003-04, the bank has announced only a 20 per cent (15+5) dividend to its shareholders," Narasimhamurthy, secretary of the bank, said.

"By March 2004, the bank's non-performing asset (NPA) was 8.1 per cent. Our target is to reduce it to below seven per cent by the end of the current fiscal," he added.

VCB, which has a customer base of 1.3 lakh, has a share capital of about Rs 11 crore. The bank runs 10 branches in and around Visakhapatnam and is awaiting the RBI's nod to open five more branches.