There was a time when you would have thought that it is all over bar the shouting for Indian Bank. But hope flickers once again that it will still prosper about five years down the line.

The Investment Information & Credit Rating Agency has suggested that the government recapitalise Indian Bank, which has accumulated losses of over Rs 1,700 crore, to the extent of Rs 2,150 crore, a huge amount when contrasted with the mere Rs 311 crore recapitalisation given to the beleaguered Uco Bank, that too through bonds.

Indian Bank has high credit-deposit ratio of 63 per cent which can be brought down only if fresh deposits are raised. The bank had been successful in raising more than Rs 1,000 crore from the public in spite of its troubled condition because of the strong brand image it had built up over the last 75 years. The bank still needs to bring down the non performing assets from the present high of 32 per cent of total advances.

Earlier, there was a plan by the finance ministry to form an Assets Reconstruction Company (ARC) for the bank. The proposed ARC will be a subsidiary, and all eyes will be on its recovery success.In 1996-97 the bank recovered Rs 320 crore worth of NPAs (in the same period, its deposits increased by Rs 1,250 crore and advances declined by Rs 600 crore).A special advisory committee, the first such in India, had been formed by the bank on January 1 to settle compromise proposals. If these innovations are pursued vigorously by follow-up actions, then Indian Bank can once again become a strong bank in another three or four years.

As one stage last year even call money markets were shunning the bank. But now this bad phase is over.

The bank can survive if it succeeds on the following counts: n Recover more than 75 per cent of its NPAs.

Bring down the level of its NPAs to 10 per cent of the total advances. Mobilise low cost deposits like current accounts and savings bank deposits thereby increasing spreads.

During a crisis, an organisation tends to cut down the benefit of it employees in order to reduce cost. but Indian Bank should do the opposite and increase the allowances and salaries of its employees. The results will start flowing.

The bank should increase the customer service hours in its branches by at least one hour every day.

nIt should introduce consumer and personal loans to salaried class at an interest rate of 18 per cent per annum. Such loans mostly do not go bad.At present the bank employs its officers in its EDP centres for a period of five years. It should increase this to 10 years so that the officers with vast experience can create in-house software for the bank's computerisation requirements. This will bring down the cost significantly. Outsourcing of software is always costly.

Indian Bank is a 90-year-old institution. In the past it has faced many crises and has recovered each time. Now also it will recover from the present position and prosper.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.