Another factor that has contributed to the lower net profit, according to former BoI chairman MG Bhide, is that some of the bank's larger accounts, granted quite sometime ago in consortium, turned non-performing assets since December, 1997.These were not reflected in the half-yearly audit of advances accounts. Against a cumulative provision of Rs 4 crore in 1996-97, BoI made a provision of Rs 300 crore in 1997-98.

"Considering that they (the SE Asian exposures) were high-yielding assets, such a large reduction, when annualised, constitutes 20 per cent of advances -- this has adversely affected our operating profits," the former BoI chairman has said.

BoI expects to write back some of the provisions made during 1997-98 as some foreign accounts likeITC Global and St James Court Hotel are likely to be recovered during 1998-99. The bank has also adopted a very prudent approach towards provisioning on NPAs which has affected its net profit. Though the local auditors at the bank's foreign offices asked BoI to provide for Rs 156 crore towards NPAs, on the advice of the Indian auditors, BoI created a provision for a further Rs 38 crore -- an additional provision of 24 per cent. "Had this not been done, our net profit would have been Rs 402 crore (Rs 364 crore + Rs 38 crore)," said Bhide.