Faced with rising bad loans, Indian Overseas Bank (IOB) is changing its lending strategy.
The public sector bank will place more thrust on loans to the retail, small and medium enterprises and agriculture segments even as it goes slow on corporate loans, said a top official.
The bank, which added bad loans aggregating of Rs 1,854 crore in the July-September quarter, has revised its credit growth target for this fiscal from 20-22 per cent projected earlier to 16-18 per cent.
Narendra said the economic slowdown could see overall accretion of Rs 4,000 crore to the bank’s bad loans portfolio in FY13. However, IOB expects to make recoveries amounting to about Rs 1,800 crore this financial year.
Hurdles to recovery
The IOB chief pointed out that clients were putting hurdles in the recovery process. For example, a borrower to whom the bank had a loan exposure of Rs 40 crore got a stay on the recovery proceedings from the Debts Recovery Tribunal by paying just Rs 2 lakh to the Tribunal.
In this regard, Narendra said the Finance Ministry has called a meeting of top recovery officers of public sector banks on October 30 and 31 to take stock of the problems being faced by banks when it comes to loan recovery.
As on September-end 2012, IOB’s gross non-performing assets, including domestic and overseas bad loans, stood at Rs 5,930 crore (Rs 3,898 crore as on September-end 2011). The gross NPA to gross advances ratio was higher at 3.87 per cent (3.07 per cent). Industry accounts for almost 43 per cent of the bank’s total domestic NPAs of Rs 5,310 crore; services (24 per cent); and agriculture (14 per cent).
Base rate
ADM Chavali, Executive Director, IOB, said the bank will cut the base rate (the minimum benchmark lending rate below which no bank can lend) only if the Reserve Bank of India pares the repo rate (the interest rate at which RBI lends funds to banks).