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NT Bureau
Chennai, July 28:

        Indian Overseas Bank (IOB) is reviewing its credit portfolio, even as there is growing demand for capital among industries, especially for infrastructure projects and manufacturing sector. But the bank's exposure to real-estate would be reduced considerably, said S A Bhat, CMD, IOB.

Indian Overseas Bank CMD S A Bhat addressing a press conference in Chennai yesterday.

'We are in a process of consolidation and have targeted a 20 per cent growth in total business this year,' he said. The bank would have a mix of CASA (current, savings accounts) and term deposits for mobilising extra resources for its credit growth. High-cost deposits which grew by Rs 6,000 crore for the year ended March 2007 would be reduced in the fiscal 2008. Efforts were on to mobilise at least one million SB accounts before March 2008.         Total business at the end of the first quarter (Q1) was Rs 1.18 lakh crore a growth of 30 per cent from Rs 91,116 crore for the same quarter of the last fiscal. Aggregate deposits grew from Rs 53,225 crore from the Q1 of 2006-07 to Rs 70,204 crore at the end of 30 June 2007, a growth of 32 per cent during the period. Gross advances witnessed a growth of 28 per cent from Rs 37,891 crore (Q1 of previous year) to Rs 48,610 crore at the end of Q1 of fiscal 2008. Net profit rose by 21 per cent from Rs 222 crore for the first quarter of the last year to Rs 268 crore at the end of the first quarter of the current fiscal.

       Net interest income grew by 23 per cent from Rs 575 crore to Rs 709 crore during the review period, while non-interest income rose by Rs 95 crore, that is, from a loss of Rs 34 crore to a gain of Rs 62 crore for the first quarter of the current fiscal. Bhat said interest rate was bound to come down in the near future, but the IOB would wait for RBI announcement before lowering its deposit rates. To improve fee-based income, the bank would be setting up syndication and derivative desks for selling equity products to customers, he informed. Net NPA has risen from 0.48 per cent as of June 2006 to 0.50 at the end of Q1 of 2007-08, but below the March 2007 level of 0.55 per cent.

        Due to pressure on margins, the net interest margin (the bank's spread) has come down from 4.01 per cent to 3.71 per cent over the year. The credit deposit (CD) ratio has also lowered from 71 per cent to 69 per cent from June last year to the first quarter of fiscal 2008.

        IOB would come out with its own insurance policy by December 2007 as means of improving its fee-based income. Further, Bhat said there was much scope for earning more from overseas branches. Total income from foreign branches was expected to rise from Rs 4,000 crore at present to Rs 8,000 crore in the next two years. In the next two years, IOB has targeted to increase its total business to Rs 2 lakh crore and net profit to Rs 2,000 crore through mobilising low cost funds and improving the quality of its lending portfolio.