The Hindu : Indian Bank: Focus on revamping borrower accounts

Online edition of India's National Newspaper
Monday, Dec 16, 2002

Business

Business

Indian Bank: Focus on revamping borrower accounts

EVEN AS it has moved aggressively to garner a larger share of the highly competitive retail banking pie, Indian Bank "has become very much alive to the requirements of restructuring and rehabilitation of many of our existing accounts in the manufacturing sector,'' according to its chairperson Ranjana Kumar.

The bank has identified 38 accounts — encompassing assorted industry segments — for possible rehabilitation. These accounts involved a total debt exposure of around Rs. 200 crores. Out of these, 20 accounts fall in the small scale industries (SSI) category, five in agriculture, four in textile and two each in cement and steel. Others are from petroleum, engineering, power, sugar and media fields. These are essentially smaller accounts. Simultaneously, four bigger accounts — with a total exposure of around Rs. 105 crores — are now being vetted under the corporate debt re-structuring (CDR) programme. Two of these relate to cement industry with a debt exposure of Rs. 73 crores and one each to steel and textile with exposures of Rs. 17.5 crores and Rs.14.5 crores, respectively. Thus far, the bank has restructured 24 accounts with a total loan component of around Rs. 262 crores.

In a freewheeling interview with The Hindu, Ms. Ranjana Kumar asserted that the manufacturing sector needed to be strengthened and that banks must continue to finance them. "It is not just giving out new loans, we have to take care of our existing accounts which may have gone bad due to factors beyond their control," she said. In such cases, "we are going in for restructuring of accounts on a need based basis," she pointed out. The restructuring could take varied forms — ranging from elongated repayment schedules to fresh infusion of funds and lowering of interest rates. "In all these cases when we do extra funding, we also look at the additional stake of the borrower," she said. The additional stake could be in the form of a personal guarantee from promoters or extra mortgage. All these are done within the norms of the apex bank, she added.

"This exercise of restructuring is a comparatively new development," Ms. Ranjana Kumar said. "It will be a success provided both parties are interested. However, it should not be at the cost of one or the other party. Both have to show equal amount of sincerity in implementing the whole project," she averred. Constant and careful monitoring at short intervals, she felt, was essential for the success of the exercise. The bank might even place one of its officers on the board of the company whose account was being revamped so as to ensure efficient monitoring and take correctives quickly if needed. The bank had a `specific team' headed by a General Manager in place to look into this restructuring exercise.

Quizzed on the recent bill empowering banks to take over the assets of wilfully defaulting borrowers, Ms. Ranjana Kumar said, "Notices have gone only to borrowers where we see a tangible security for which there could be takers. You can sell the asset through a public auction". Problems could crop up only when there was a running factory, obsolete machine or the like. Indian Bank, she said, had already begun actions on erring accounts individually financed by it.

The Chairperson expected the merger of the merchant-banking arm with the bank to fructify by June next year. The merger route was chosen in this instance since the subsidiary had substantial inter-corporate deposits (ICDs), she pointed out. The bank, it may be recalled, had sold its mutual fund arm to the Tatas some time ago.

Ms. Ranjana Kumar was hopeful that the Government would provide fresh capital infusion of Rs. 779 crores by March next. Fresh capital would make the bank comfortable vis-a-vis the capital adequacy ratio. Any strengthening of Tier-II capital could be contemplated after the final re-capitalisation. The bank had thus far made cash recovery (of NPAs) to the tune of Rs. 125 crores in the current financial year. She indicated that the bank laid much store by improving cash recovery of NPAs, monitoring standard assets and revamping need-based accounts.

Ms. Ranjana Kumar, who fielded a range of questions, said the bank had started giving greater thrust to marketing to take on competition in the quickly metamorphosing retail lending arena. In the last couple of years, it had drafted — with much success — the services of MBA graduates to sell the bank. In fact, it had created an independent marketing outfit, headed by a General Manager, comprising 75 officers who had willingly opted to join it. The Chairperson was conscious that the bank should erase its `old boy' image and win the hearts of the young ones. The recent launch of the Power Account for Young Achievers — the first account being given to the ace car racer Karthik Narayan — was precisely aimed at sending the correct signals to the general public at large, she said. To the long time Indian Bank watchers, the way the Power Account was launched — marked by a saxophone concert by Kadri Gopalnath and a power point presentation — came as a big surprise.

Ms. Ranjana Kumar said the bank had a wealth of talent within. To buttress this claim, she pointed to the merit-based promotion of clerks — first time in the annals of the bank — through written tests and interviews. Nonetheless, she said the bank would go for specialised talent from outside. Fifty specialists had already been recruited and another 200 next year. The objective of going in for outside talent, she explained, was to facilitate faster technology upgradation, improve customer relationship and beef up risk management skills.

As for launching Internet banking, Ms. Ranjana Kumar said it would have to wait a while. The bank had 74 ATMs (automatic teller machines). Nearly 40 of them were inter-connected. These were connected with the switch operated by the Indian Bank Association. The Chairperson said Indian Bank was holding parleys with Syndicate Bank for sharing the latter's network.

K. T. Jagannathan & Shanthi Kannan

in Chennai

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