Aga Khan Fund for Economic Development (AKFED) will soon reduce its stake in Development Credit Bank (DCB) by 3-4%, keeping with the road map submitted by the bank to the Reserve Bank of India (RBI) to reduce the promoter holding to 10% by 2014.
The bank plans to raise about Rs 150 crore via qualified institutional placement (QIP) by December 2010. The regulator has not issued branch licences to DCB for the past one-and-a-half years because AKFED had not lowered its holding in the bank to the prescribed 10% limit. However, following a reduction in losses and some dilution in promoter holding post November 2009, the central bank, in 2010, has issued two branch licences to the bank. Other private banks though have managed to bag more licences.
“We have submitted a road map to the RBI to dilute promoter holding to 10% by 2014. The promoters are barred from subscribing the issue,” observed Murali M Natrajan, MD& CEO, DCB said. “The board has cleared the raising of around Rs 150 crore which would dilute promoter holding by 3 to 4%. We also need the capital to support our asset growth,” Natrajan added. He also observed that depending on the market conditions, the bank may also consider a rights issue. Currently, the bank has 80 branches and the promoter holding in the bank stands at 23.11% as against 26% prior to November 2009. The bank had raised Rs 81 crore via QIP issue in November 2009. For the next two years the bank plans to grow its balance sheet by about 20%. Its capital adequacy ratio at the end of June 2010 stood at 13.8%.
“We have been under monthly monitoring of the RBI for sometime now. We submit preformated data sheet to RBI every month. Once we start posting profit and consistently follow the road map toward reducing promoter holding, we could apply for more branch licences,” Natrajan said.
The bank clocked a loss of Rs 2.9 crore at the end of June 2011 quarter as against a loss of Rs 35.3 crore in the corresponding quarter last year. The bank aims at getting back to the profitability path by the December quarter of the current financial year 2010-11. Like some of its peers, it is also focusing on growing its current and saving account base and keep it above 30%, however, Natrajan feels the branch network is a constrain.
“Bank with a small capital base like ours should not have scaled up its exposure to unsecured lending to about Rs 750 crore. We are now running down that book and building the secured side of the business like mortgages and loans to small and medium enterprises,” he said.
The bank has reduced the unsecured loan book from a Rs 750 crore to Rs 50 crore. The net non-performing assets as a percentage of advances stands at 2.53% and the gross non-performing loans stood at 8.47% at the end of June 2010. The NPA in the banks personal loan business is currently around Rs 165 crore and it is recovering loans in the range of Rs3 to 4 crore every month.
?We will see the gross non performing loan ratio come down to around 7.50 to6% by March 2011,? he added.
