Gupta: Flexible

Calcutta, July 20: Indian Overseas Bank (IOB) is open to the idea of divesting its stake in Bharat Overseas Bank following the recent guidelines issued by the Reserve Bank of India.

According to S. C. Gupta, chairman and managing director of Indian Overseas Bank, “At present the bank’s stake in Bharat Overseas Bank is an investment. However, if the Reserve Bank lays down any guideline, the bank will honour it.”

The new norms proposed by the RBI on July 6 require promoter stakes in banks to be cut down to 10 per cent. The apex bank had further said based on the feedback received on draft regulations, a second draft would be prepared by the RBI, which is expected to clearly articulate the subtle nuances in the policy so that there is greater clarity in norms.

Seven banks hold stake in Bharat Overseas Bank. Indian Overseas Bank is the largest shareholder with 30 per cent equity.

The other banks are — Bank of Rajasthan (16 per cent), ING Vysya Bank (14.66 per cent), Federal Bank (10.67 per cent), Karur Vysya Bank and South Indian Bank (hold 10 per cent each) and Karnataka Bank (8.67 per cent).

Once the RBI implements the guidelines, IOB will follow the normal valuation procedure and would appoint an advisor of the stature of SBI Capital Markets to carry on the modus operandi and determine the pricing, Gupta said.

The bank’s first quarter results are due shortly. Gupta said IOB’s results in the April to June quarter will be better compared with the results of the corresponding period last year. It has targeted a growth rate of 17 to 18 per cent for the current fiscal, with an increase of Rs 3,500 crore as advances.

Agricultural lending is going to be the thrust area for the bank this year and it expects to increase it to Rs 1,300 crore, up 30 per cent over last year’s increase of Rs 1,000 crore. As on March 31, 2004 the bank’s total agricultural lending stood at Rs 3,400 crore and by the end of this fiscal the figure is expected to go up to Rs 4,700 crore.

IOB is in the process of setting up representative offices in China and Malaysia.

The bank has recently raised tier II capital of Rs 200 crore. The capital adequacy ratio of the bank as on March 31 was 12.49 per cent. It has also been able to bring down the net NPA from 2.85 per cent to 1.50 per cent.