IOB plans to restructure SME and corporate loans

Source : BS :Vijay C Roy / New Delhi/ Chandigarh December 7, 2011, 0:02 IST

In order to facilitate its corporate customers who have been hit by dollar appreciation and slowdown, public sector bank — Indian Overseas Bank is planning to restructure the SME and corporate loans. The bank has received applications from its customers regarding restructuring of loan.

Speaking to Business Standard, executive director, A K Bansal said, “The dollar appreciation has impacted importers. Also, corporates who have raised money under FCCB (Foreign Currency Convertible Bond) route are under pressure and they are finding it difficult to repay. We are getting applications from our customers regarding restructuring of loans. In order to address the issue we have facilitated them by offering longer repayment schedules and we are thinking to further facilitate them."

The bank’s NPA has touched Rs 3,898 crore as on September 2011, whereas it was around Rs 3,200 crore as on March 31, 2011. On being asked about the reason, behind increase in NPA, he mentioned, “There are so many reasons behind increase in NPA. Firstly, the real estate sector is facing slowdown, delay in projects and bad recovery from agriculture sector. Also, we have switched over to system based NPA."

However, amid fears of pressure on margins of banks in the prevailing high interest rate scenario, Bansal said, “Banks are expecting NIM of 3 per cent by the end of this financial year against 2.8 per cent as on September 2011. There has been some increase in the cost of funds but it has been more than compensated by the yield on assets. We aim to maintain our net interest margins (NIM) by increasing our low-cost deposits, or the current and savings account (Casa) deposits. We would garner more Casa deposits by opening new branches and accounts."

Further, having already opened 116 branches in the current financial year, the bank is plans to open another 300 branches specially in tier-II and tier-III cities. Also, the proposed expansion will help the banks to achieve a Casa of 31 per cent from 28 per cent at present.. In Punjab and Haryana, the bank is opening 11 more branches in the current financial year. Out of the total, three branches would be specialised SME branches and two would be specialised branches for corporate.

Bansal mentioned that the thrust area of the bank will be to continue to give loans to micro small and medium scale enterprises and the agricultural sector, according to the targets.

Further, having already crossed 2,90,000 crore business as on September 30, 2011, the bank is expecting a business growth of 20 per cent in the current financial year.