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AllBank drive against bad loans intensifies

Calcutta, Oct. 7: Allahabad Bank, on the verge of launching a Rs 100-crore equity flotation, has set a target of reducing its non-performing assets (NPAs) by Rs 500 crore in the current financial year. The offering of 10 crore equity shares at a price of Rs 10 each opens on October 23.

The bank has started earning profits, but high level of bad loans remains a matter of concern. “The bank has always earned profits. We are trying to bring down our NPAs substantially. Last year, we recovered Rs 350 crore. We are also tight-fencing fresh accretion to NPAs,” chairman and managing director B. Samal said.

The gross NPA stood at Rs 2001.85 crore, while net NPA was around Rs 1160.16 crore on March 31. The bank has taken short-term and long-term strategies to tackle the problem. It has sent notices to 600-odd defaulters under the new NPA Ordinance to Rs 100 crore.

The objective of the offer is to enhance capital to meet future requirements. The capital adequacy ratio, now 10.62 per cent, will increase to 11.5 per cent after the offer.

Explaining the rationale behind the issue, Samal said the bank expects growth in business in the years ahead. “As a result, risk-weighted assets are likely to increase over the years. Increase in Tier-I capital through retained earnings may not enable the bank to maintain a sufficient capital adequacy ratio. In view of the likely expansion of loans, the bank proposes to augment its net-worth in order to sustain a healthy CAR.”

The government’s holding in the bank will fall to 71.16 per cent after the issue. “In the current fiscal, the bank will invest more in infrastructure projects. We will increase our exposure to the power sector,” Samal said in remarks about the bank’s lending.

Total deposits grew 12.7 per cent to Rs 22,666 crore on March 31, 2002 from Rs 20,106 crore a year ago. The share of low-cost deposits in the total improved from 42 per cent on March 31, 2001 to 42.3 per cent on March 31, 2002.

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