The meeting is expected to take to task those zonal managers who have faltered on their commitment to monitor asset quality early this year. The asset quality of the bank has worsened over the last three months, bank officials said. According to preliminary estimates, net NPA figures have shot up to above 8 per cent as on September 30, 1998, from 7.34 per cent as on March 31, 1998.

The sharp dip in the bank's first-half profitability was caused by its inability to book income from the sticky accounts, senior BoI officials said. Besides, the bank was also required to make provisioning on accountof fresh NPAs.

"The increase in interest income is not in proportion to the growth in advances," a bank official said. This has caused ballooning of the gap between interest expenditure and interest income.

The bank reported a whopping 33.88 per cent increase in interest expenses while its interest income grew slower at 19.87 per cent. This was despite the softening of interest rates during most of the first six months of this fiscal. The difference between the growth in interest income and interest expenditure will widen further if interest rates move up -- as is widely expected -- in the second half of this fiscal, analysts said.

Bank of India had merely revealed the gross NPA figure (which is the ratio of NPAs to advances on gross basis) at the time of announcing the first-half results. The gross NPAs were pegged at 13.17 per cent against 13.15 per cent in September, 1997. "This figure can be manipulated and kept lower by an increase in advances," a banking analyst said.

Bank of India's two-prongedstartegy of controlling the effect of NPAs on balance sheet by compensating new slippages in asset quality by a reduction of its gross NPA seems to had failed, insiders said. The strategy was to reduce its gross NPAs through recoveries, upgradation of asset quality, write-offs and compromises, while reducing the extent of slippages in asset quality.

The bank had managed to keep its net NPA figures low throughout by keeping the gross reduction of NPAs higher than the slippages till last year. The meeting of zonal managers will take up the extent of new NPA reduction achieved by each zones and the strategy to be adopted to keep the gross NPA reduction lower than the slippages.

Banking analysts said unless serious attempts are made to rein in the growing NPAs, BoI may end up posting net loss in fiscal 1999. The bank will need to make higher provisioning against bad loans in the second half as the provisions in the first half were not in keeping with the deterioration of asset quality. Provisions on accountof depreciation of investments are also likely to be substantial this year as the yield to maturity of government securities is expected to move up towards end March 1999, from one of its lowest levels last year.