Banks trim Internasional Indonesia exposure
Raghu Mohan
MUMBAI, January 13: Bank Internasional Indonesia (BII), the sole Indonesian bank operating in the country, is facing rough weather owing to the financial crisis back home and mounting local operational problems.BII is part of the Sinar Mas group, which has a paper-pulp project near Pune. The bank, once with a worldwide net worth of $7 billion, is now a pale shadow of its former self. The collapse of the Indonesian rupiah from 2,300 to a dollar in May 1997 to 8,500 has seen the bank's global net worth being eroded substantially. In India, leading state-run banks have reportedly scaled down or totally cut their inter-bank limits to BII (net profit in 1996-97: Rs 3.8 crore). Sources say the banks include the State Bank of India, Central Bank of India, Dena Bank and Corporation Bank. Inter-bank sources said: "BII is under close watch. Very few (banks) are entering into forward contracts with it". BII is, therefore, precariously poised. In the year to March 31, 1997, it had a deposit base of Rs 121 croreand outstanding borrowings of Rs 147 crore. Of the borrowings, Rs 77 crore came from other banks. Advances for the said period stood at Rs 170 crore. BII has been aggressive in bill-discounting and its balance sheet for 1996-97 shows a portfolio of Rs 102 crore. Cash credits, overdrafts and loans stood at Rs 63 crore, while term-loans amounted to Rs 46 lakh. BII effectively services its corporate clients out of substantial call borrowings. Overnight rates are now firming up to 9.25 per cent levels. BII's inter-bank borrowings from other foreign banks are small as multinational banks are usually net borrowers in the overnight markets. A senior inter-bank dealer said at one point, BII borrowed $10 million at 6.5 per cent from Abu Dhabi International Bank. The borrowing has since been squared up. Bankers say reluctance on part of other banks to limit exposures will affect BII, especially its bill-discounting ability. Set up in 1995-96, BII was hoping to lock into bilateral trade between India and
Indonesia. But it does not have any relationship in the area. The bank is supposed to have a small exposure to the AV Birla group's Indo Gulf Fertilisers, but on the whole, there are no blue-chip clients. The Reserve Bank of India's (RBI's) exposure norms and BII's small size prevented such relationships. The bank is prohibited by extant RBI guidelines to have a commercial- banking relationship with Sinar Mas in the country as it belongs to the same group. BII, however, did route some remittances for Sinar Mas, which sources say, are okay. Important corporate clients of the bank include the Chennai-based Glenn & Marshall and S&S Switchgear, part of the Mumbai-based Sushil Jalan group. BII took a big hit on account of the trouble-hit Nandan Gadgil group. About Rs 15 crore had to be fully provided for on this account. Fifty per cent of the Rs 15-crore exposure was provided for in the 1996-97 balance-sheet, while the remainder was provided for recently. Non-performing assets (NPAs) stood at 5.47 per cent
of advances at end-March 1996-97. BII's paid-up capital is Rs $13 million, which was bought in two tranches of $3 million and $10 million each, in all amounting to about Rs 46.8 crore. Sources say that Rs 12 crore went towards buying offices in south Mumbai's Amarchand Mansion from Atul Nishar's Apple Finance. A further amount of Rs 12 crore was incurred when BII took its offices in Raheja Chambers at the business hub of Nariman Point. The Indonesian bank is also facing problems on the personnel front. It was rudderless for sometime with the exit of its country-head, Raghu Palat, and corporate-banking head, Kurush Billimoria. The fort is now held by its former marketing-head, Jopie Gumaye, operations-head, Tony Widjaja, and financial controller, Smita Vijaykumar. Repeated phone calls to the local offices of BII did not evoke any response. Both BII's financial controller, Smita Vijaykumar, and its current country-head, Jopie Gumaye, declined to answer queries from The Financial Express.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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