Encouraged by this perhaps, Indian Bank CMD S Rajagopal, termed the performance `a turnaround'. He said ``there has been a turnaround but as you are aware dramatic turnaround is not possible. No bank in similar condition could achieve faster turnaround (sic).'' Although profits for the year were back in black, there are worrisome signs that the bank's troubles are far from over. Non-performing assets actually grew, ending fiscal '97-98 at Rs 1,889 crore or 26.01 per cent of net advances, compared to 25.91 per cent last year, despite recovery of Rs 366 crore of NPAs. According to Rajagopal, current year additions to the NPA list were around Rs250 crore. He said that the bank was expecting to recover Rs 800 crore in the current fiscal.

For the purpose, several steps such as setting up of a settlement advisory committee, a special recovery monitoring cell, increase in recovery officers, etc have been taken. The bank now plans to set up an asset recovery company. Once the legislative formalities are completed, the bank is expected to submit a plan for an ARC with a size of about Rs 1500 crore.

This move will also help the bank attain the desired level of capital adequacy of 9 per cent by 2000 as recommended by Narasimham committee. During 1997-98, the deposit base improved by 1093.91 crore (up 7.6 per cent), while advances increased by 395.53 crore (7.4 per cent). Although aggregate advances stood at Rs 7260.43 crore, interest income actually fell sharply.

From Rs 1563.16 crore in 1996-97, it declined to Rs 1464.21 crore - a drop of 6.30 per cent. That the confidence to lend industry is yet to return fully is evident from the fact that thebank has parked Rs 636 crore more than required in government securities. Interest expenditure declined to Rs 1352.86 crore (Rs 1442.03 crore) and Rajagopal attributed this to efforts undertaken by the bank to reduce its exposure in certificates of deposit to 4.4 per cent of aggregate deposits from 12.8 per cent as on March 31, 1997.

The bank also significantly reduced its borrowings from the money market and finished the year as a net lender, having deployed surplus funds to the tune of Rs 80 crore.

Operating expenses were higher at Rs 522.92 crore (Rs 476.59 crore) mainly on account of higher staff expenses such as salary and pension to the extent of Rs 47 crore. Provisions and contingencies stood at Rs 92.00 crore (Rs 250.73 crore). The bank's capital adequacy as on date stands at 1.42 per cent. Further infusion of Rs 400 crore by the government of India and transfer of bad debts worth Rs 1500 crore to the ARC should substantially improve its capital adequacy ratio.

During the year, the bank receivedrecapitalisation funds to the tune of Rs 1750 crore in February. Rajagopal said that the had the funds come earlier, the performance would have been better.

Recap funds may be sunk

The Rs 2,150-crore recapitalisation by the centre, it seems, will end up being a sunk cost, if Indian Bank chief Rajagopal is to be believed. Asked about the future plans of the bank, he said it would make a nominal profit next year and wipe out a part of the accumulated loss amounting to Rs 2403.38 crore over a period of five years through profit accretion to the extent of Rs 1000 crore.The bank plans to wipe out the remaining loss by approaching the centre to effect a cut in its capital. This could mean that the centre could end up losing the recap amount. All this to enable the bank float a public issue.

From Rs 1563.16 crore in 1996-97, it declined to Rs 1464.21 crore - a drop of 6.30 per cent. That the confidence to lend industry is yet to return fully is evident from the fact that the bank has parked Rs 636 croremore than required in government securities. Interest expenditure declined to Rs 1352.86 crore (Rs 1442.03 crore) and Rajagopal attributed this to efforts undertaken by the bank to reduce its exposure in certificates of deposit to 4.4 per cent of aggregate deposits from 12.8 per cent as on March 31, 1997.

The bank also significantly reduced its borrowings from the money market and finished the year as a net lender, having deployed surplus funds to the tune of Rs 80 crore.

Operating expenses were higher at Rs 522.92 crore (Rs 476.59 crore) mainly on account of higher staff expenses such as salary and pension to the extent of Rs 47 crore. Provisions and contingencies stood at Rs 92.00 crore (Rs 250.73 crore). The bank's capital adequacy as on date stands at 1.42 per cent. Further infusion of Rs 400 crore by the government of India and transfer of bad debts worth Rs 1500 crore to the ARC should substantially improve its capital adequacy ratio.

During the year, the bank received recapitalisation funds tothe tune of Rs 1750 crore in February. Rajagopal said that the had the funds come earlier, the performance would have been better.