The Hindu Business Line : Andhra Bank hopes to recoup Rs 150-cr NPAs in H1

Two steps will help the bank achieve this — sale of Rs 50 crore of loans to Asset Reconstruction Company of India Ltd and a settlement of claims worth Rs 35 crore by the Export Credit Guarantee Corporation (ECGC).

The bank's Chairman and Managing Director, Mr T.S. Narayanasami, told Business Line that he was confident of recovering the Rs 35 crore of export credit that had gone bad, because ECGC's approach was "very positive".

Incidentally, the bank will soon enter into an agreement with ECGC to market the Corporation's products. ECGC, a Central government-owned company, insures for exporters the risk of non-payment of receivables by overseas buyers.

Mr Narayanasami was here in connection with the opening of a branch.

Speaking to journalists on the occasion, he said that the bank intended to raise its agricultural credit by over 40 per cent to Rs 3,100 crore. This will take agriculture loans portfolio of the bank to 18.2 per cent, from last year's 17.07 per cent.

"Agricultural loans can be viewed commercially," he said, adding that even at 8.25 per cent rate of interest charged agri loans, the yield was good.

He said the bank expected to raise its low cost deposits by 30 per cent this year.

At the end of 2003-04, the bank's deposits stood at Rs 22,940 crore, nearly 40 per cent of which were low cost (savings bank and current account) deposits.

To achieve this, the bank's gameplan is to restore the personal touch with the customers.

"Some twenty years ago, if you gave a branch manager an address in his area, he will tell you all about the family residing there. Today, the personal touch is lost," he said, adding that the bank had created a crop of `customer relations managers' to strengthen personal relations with customers.

Asked about the impact of the possible rise in interest rates on the bank's profitability, Mr Narayanasami said that all banks were having "anxious moments". But he said that there were enough precedents to show that any spurt in interest rates would be only temporary.

When interest rates rise, on the one hand banks will be lending money at a higher rate of interest, but on the other, the market value of the securities it holds will come down. For the erosion in the market value, banks will be required to make provisions in their books. The provisions eat into the net profit.

Mr Narayanasami said that in any case the era of banks making bumper profits from trading in securities — which has been happening in the last two years when interest rates were falling — was coming to an end.

For non-fund based income, banks will have to rely on fees from services.

Profits from trading in securities can come only from volumes, or buying and selling bonds from the markets, he said.

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