The Hindu Business Line : IOB profits fall 74%

Mr S.A. Bhat, Chairman and Managing Director, Indian Overseas Bank, and Ms Nupur Mitra, Executive Director, at a press conference in Chennai on Thursday.

Our Bureau

Chennai, Jan. 28

Indian Overseas Bank's net profit was dented by 74 per cent to Rs 102 crore for the third quarter of 2009-10 due to provisioning for bad debts, wage settlement and a fall in treasury profits compared with Rs 388 crore for the same period the previous year.

Addressing a press conference Mr S.A Bhat, Chairman and Managing Director, Indian Overseas Bank, said that the “result was not good” and a few slippages of bad debts during the last quarter of 2009-10 could be expected. About Rs 1,000 crore of bad debts were added during the last nine months, of which Rs 444 crore was from infrastructure and educational institutions, Rs 165 crore from priority sector and Rs 200 crore each from trade finance and real estate sector.

He clarified that the build up of bad debts was not a result of restructured assets. Of the total amount of Rs 8,200 crore restructured loans only Rs 745 crore were bad loans, of which Rs 600 crore of assets would be upgraded to standard assets, said Mr Bhat.

The recent mandate by the Reserve Bank of India to hike provisioning on bad debts to 70 per cent, has impacted IOB as it had to make additional provisioning of Rs 232 crore due to build up of bad debts. Talking about the fall in treasury income, Mr Bhat said that the bank earned only Rs 17 crore for Q3 of 2009-10 compared to Rs 382 crore for the same period last year. Pending finalisation of wage revision, a provision of Rs 88 crore was made towards wage arrears.

The Chairman said that the bank expects to sell 15-20 per cent of bad debts to Asset Reconstruction Companies provided they get 60 per cent realisation of asset value so that the bank can cut down its provisioning on bad debts.

The bank will not be aggressive but selective in its advances and plans to grow its credit book by 15 per cent, he said. Advances grew by 11 per cent to Rs 79,408 crore and deposits posted a 14 per cent increase to Rs 1,06,429 crore as of December 31, 2009 from the previous year. Credit sanctioned but yet to be disbursed was Rs 15,000 crore, only Rs 5,000 crore has been disbursed in the last nine months.

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