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`Andhra Bank in no hurry to enter market'

N. S. Vageesh

C. R. Sukumar

CHENNAI/HYDERABAD, Aug. 2

ANDHRA Bank is one of the public sector banks expecting to make its capital market debut later this year. Mr. B. Vasanthan, Chairman and Managing Director, who spent the major part of his banking career in Syndicate Bank, is conscious that the market moo d is not favourable at the moment.

``We are waiting for an opportune moment. We are not in a hurry,'' is his answer to a question on whether the bank needs to approach the market in this atmosphere.

Speaking to Business Line at his office in Hyderabad, of his bank's operations, he said: ``We will not be in any business which does not add to our bottomline.''

Is your bank going to increase interest rates following the hike in the bank rate and CRR last week?

We are watching the situation closely. Our prime lending rate continues to be 12 per cent. No bank has yet come forward to increase the rate till now. Once the CRR and bank rate hikes are absorbed into the system, we may take a view.

Our board is likely to meet in the third week of August to decide the next step.

At 12 per cent, can you make money on lending operations? Most banks seem to be making more money from treasury operations rather than lending. Is that how it should be?

At 12 per cent, we don't lose. But our spreads are certainly going down. Our spreads are now slightly less than 3 per cent. We have to increase our business volumes. We had our share of trading profits in Government securities last year. It is not a ques tion of whether making money on Government securities is the way things should be. We are doing what we can do. We are now planning to open a subsidiary to operate as a primary dealer in Government securities. Our papers are with the RBI and we are await ing their approval.

What advantage do you get by having a primary dealership (PD), given that you already trade in Government securities as a bank?

As a primary dealer, I'll be a market maker for Government securities. The RBI will give me priority in these issues. Underwriting various Government issues will also provide me additional income.

But underwriting commissions are going down and competition is getting intense as more PDs have come in...

Look at the performance of PNB Gilts last year. They came out with a public issue at a premium, which has been oversubscribed. We do find an opportunity in operating as a PD. Our activities will get enlarged. What we do as a PD will be more than what we do in the Government securities market as a bank.

What are your business plans for the current year?

We plan to increase our business levels to around Rs. 30,000 crores from last year's level of Rs. 20,000 crores. We will be focussing on doubling our retail portfolio, which is currently around Rs. 500 crores. The thrust will be on retail trade loans, pe rsonal loans, housing finance and information technology.

Do you see any signs of slowdown in deposit growth in your bank during the current fiscal? Will you hike your deposit rates?

Our deposit growth during the last year was 38 per cent. We are growing at a fast pace in the current year also. Interest rates do influence deposits but only to a small extent. Higher rates are only the icing on the cake and not the cake itself. Relatio nships matter and we get nearly 60 per cent of our deposits in Andhra Pradesh itself -- and a significant part of it from our rural and semi-urban branches. These areas can provide me low-cost deposits.

Is your bank planning any VRS packages? What about rationalisation of branches?

Our manpower planning department is conducting a study to identify surplus staff. But we are looking at the macro-level views on VRS and only then can bank-specific schemes emerge.

As for rationalisation of branches, I have no plans to close any branches. We are undertaking studies on loss-making branches (there are about a 100 of them). A clear picture should emerge by September after which we can devise a strategy for it.

How is the pace of computerisation proceeding in your bank?

At the moment, 142 branches have been fully computerised and 232 are partially computerised. We expect 70 per cent of the business to be computerised by December 2000. We intend to launch `any branch banking' in about 10 branches in Hyderabad by August 3 1. This will be followed by launches at other metros and non-metros by December 31. We have earmarked Rs. 60 crores for computerisation and networking in the current fiscal.

Is your initial public offering on course? The current market atmosphere does not seem very conducive...

The IPO is on course. Our lead managers are moving the matter with SEBI. I agree markets are fluctuating now. We are waiting for an opportune time. Considering that my capital adequacy ratio is 13.36 per cent and that I have adequate leverage on tier II, I am not in a hurry.