Fazed by a drastic drop of 53% in its third-uarter net profit, Chennai-based Indian Overseas Bank (IOB) is set to focus on recovery of bad loans and non-interest income in a big way. The public sector lender will be taking slew of steps to aggressively pursue recovery of NPAs to reverse the trend by the next quarter.

The bank has a R3,972-crore gross NPA as on December 31, 2011, and is hoping to recover a total of R1,500 crore by the end of the current financial year. Last year, it had opened 11 asset recovery branches to accelerate recovery process.

M Narendra, chairman and managing director, IOB, said: “Besides recovery initiatives, we will be focusing more on non-interest income and good deployment of investment and enhancement of working capital. The bank has approached the Centre for capital of R1,450 crore so that its Tier-I CAR could be kept at the required 8%. We are hopeful that we will be able to get the funds very soon. ?

Higher provisioning and restructuring of bad loans have taken a toll on the bottom line of IOB, with its net profit dropping by 53% to R108.27 crore for the third quarter from R231.66 crore it logged in the same quarter last fiscal.

Narendra said two major accounts, along with other small accounts, have been restructured during the third quarter, resulting in reduction of income.

?We had to keep interest in reversal of around R75 crore for restructuring of these large loans, which also affected our gross profit. It had restructured bad debts of R3,600 crore for the quarter ended December, 2011,? he said.

Gross NPAs stand at R3,971.89 crore during the quarter against R3,264.50 crore during the same period of last fiscal. It had recovered NPA of R843 crore during the first nine months of current fiscal and is expecting to recover a total of R1,500 crore in the full financial year, surpassing the target of R1,200 crore recovery for the fiscal.

The total business of the bank grew from R2,25,191 crore as on December 31, 2010, to R2,99,555 crore as on December 31, 2011, recording a year on year growth of 33.02%.

While total deposits grew from R1, 25,062 crore to R1,67,006 crore, recording a growth of 33.54%, total gross advances increased from R1,00,129 crore to R1,32,549 crore, posting a growth of 32.38%.

The total income of the bank in Q3 increased to R5,015 crore from R3,453 crore in the same quarter last fiscal. Net interest income increased to R1,222 crore from R1,130 crore . The non-interest income increased to R411 crore from R351 crore.

The bank, which has witnessed drop in its current account savings account (Casa) during the third quarter, is also planning to open more branches in rural and Tier-II cities to fuel savings account growth. The bank has opened 354 branches during the last calendar year, taking the total number to 2400. ?Out of the 354 branches , 98 were in rural areas. We are also planning to open 300 branches more during the current year,? said Narendra.