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Squeeze on spreads testing banks' skills: IOB chief

Our Bureau

New Delhi , July 16

THE squeeze on spreads is testing the skills of bankers, the Chairman and Managing Director, Indian Overseas Bank, Mr S.C. Gupta, said today. "How a bank manages to make higher profits in the overall scenario of declining spreads is the real test," Mr Gupta said.

Addressing a gathering at the inauguration of the bank's 123rd ATM here today, Mr Gupta said that more and more customers have been asking for foreign currency loans of late at Libor plus rates thereby further putting strain on the spreads. "Customers have been asking for foreign currency denominated loans at 50 basis point or a 100 basis point over Libor which comes to a total interest rate of around 2-2.5 per cent. This is when banks' average cost of funds hover around 5 per cent," he said.

Despite the narrow spreads, he pointed out that IOB has been showing higher profits each year with the net profit for the year 2002-03 standing at Rs 417 crore against Rs 40 crore in March 2000. Mr Gupta said that the bank was all out to increase its ATM network.

"We are thinking of tying up with some banks to share our ATM networks. Things would take concrete shape in this regard soon," he said.

He said that already the bank's 1,442 branches are computerised, with 580 of them being fully automated. "We hope to increase the number of fully computerised branches by a large number in the coming months," Mr Gupta said.

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