The Thrissur-based bank had gone public in April 1996 with an initial public offer of 80 lakh shares at a premium of Rs 40 to mobilise Rs 40 crore.

Though the bank received Rs 15 on application, a good number of subscribers refrained from paying the balance amount of Rs 35, TM Venkataraman, chairman of Dhanalakshmi Bank, said.

Now the bank was planning to issue shares on a pro-rata basis to such shareholders who had desisted from paying up, apparently in view of the dismal market conditions, he said.

The defaulted shareholders would now get shares to the extend of the amount they had paid on application, but lower than they had applied for, Venkataraman said.

This would result in the bank's present issued capital of Rs 18 crore being reduced to Rs 16 crore. The equitycapital of the bank was Rs 10 crore before the public issue.

The bank had approached the Reserve Bank of India (RBI) with the proposal and once the RBI approval was received, it would move the high court to get permission to whittle down the capital, he said.

After the proposed capital restructuring, an agency would be appointed to buy the odd lot of shares from shareholders to bundle them into tradeable lots in the secondary market.

The chairman said the foreign exchange dealing centre of the bank would soon be shifted to Mumbai from Ernakulam to attract more business.

The bank generated an income of Rs 50 crore from forex dealing in the current fiscal year at a turn over of Rs 25 crore. "We propose to double our income from the forex dealing in the next year," Venkataraman said.

The bank had a capital adiquacy ratio of 11.39 per cent as against the stipulated 9 per cent, he said. Asked about the non-performing asset (NPA) level, he said the bank would strive to bring its NPA level down to 10 percent next year from the present level of 11 per cent.

The average cost of funds would also be brought down to below 10 per cent by March this year from the current rate of 11 per cent, he said, adding, this would be further lowered to 9-9.5 per cent during year 2000.

While the bank's deposits in 1998-99 had increased to Rs 1,600 crore from Rs 1,040 crore last year, its advances stood at Rs 650 crore as against Rs 590 crore in the previous year.

"We have taken a very cautious approch in choosing corporate clients. Retail banking is our strongfold and we have decided not to go for large scale corporate financing," Venkataraman said.

Started in 1927, the bank has established 148 branches with 112 branches in Kerala. "We now plan to expand to north India where we have only one branch. We have already computerised 37 branches which covers 60 per cent of the total transactions," he said.

As for the year 2000 (Y2K) problem, Venkataraman said Dhanalakshmi Bank had already achived Y2K compliance and the RBIhad been informed of this.

The bank would now focus its attention on networking its branches in the next two years, he added.