Indian Overseas Bank (IOB) has appointed KPMG as its external consultant to advise the bank on business process reengineering, bad debts and performance. KPMG will analyse the banks performance and growth pattern for the past seven years and come out with its recommendations.
Speaking to ET on the sidelines of 10th AGM on Tuesday, IOB, chairman and managing director, Mr Suhas Anand Bhat said KPMG would come out with the report in the next one and half months after which it would go to the board and corrective action would be taken.
Earlier at the AGM, he said, "The bank has been reeling under pressure due to bad debts for quite sometime now. The bank’s performance was also not promising when compared to its peers. So, we wanted to know where exactly we went wrong. We, therefore, decided to appoint KPMG to bail us out."
When shareholders whipped him with questions about the bad debts that have been mounting up, he noted that the recovery and upgradation of non performing assets during the first quarter of this financial year 2010-11 was significant amounting to Rs 508 crore as compared to Rs 177 crore during the first quarter of 2009-10.
He further added that the downturn following global financial crisis had impacted the payment capacity of the bank’s borrowers and bad debts were added mainly in the infrastructure, priority sector, trade finance and real estate sectors. "Though the ongoing projects in the realty sector were on track. customers had trouble getting their payments on time which resulted in defaults," he noted.
For fiscal 2010, the banks non performing assets ratio stood at 2.52 per cent while the gross non performing assets ratio stood at 4.47 per cent at the end of the year.
IOB’s net profit crashed to Rs 706.96 crore as against Rs 1,325.79 crore for the year ended March 31, 2009 registering a decrease of 46.68 per cent. Its total business grew from Rs 1, 75,925 crore at end 2008-09 to Rs 1, 91,577 crore in 2009-10, an increase of 8.90 per cent.
When the members questioned the acquisition of Pune based Shree Suvarna Sahakari Bank (SSSB), which added around Rs 240 crore of NPA, the chairman, said, "SSSB gave access to captive customer base of 2.58 lakh, besides 11 branches in Pune and 2 in Mumbai, which we would not have got otherwise. By September. we would recover Rs 130 crore of bad debt and the rest will be collected in three years."
Going forward. the bank intends to have strong rural penetration and overseas presence. It also wants to have a selective, measured and sustained credit expansion.
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