Friday, June 5, 2009

Can Bank of India Balance Growth and Profitability?

When it comes to Indian banking, there are certain notions regarding private sectors banks and public sector banks. Profits, for one example. Which is the most profitable bank? An agile new-generation private bank like Axis Bank or a traditional public sector bank like Bank of India (BoI)? Axis is no doubt the country’s most profitable private sector bank at 13.22% profitability, but BoI beats it squarely at 15.50%. In fact, the 103-year old BoI is the country’s second most profitable bank. Bank of India, however, has no plans to rest on its laurels. BoI is embarking on a grand plan that will see a business mix of Rs. 4,00,000 crore by the end of this fiscal. For this plan to succeed, deposits should grow by 20% and advances by at least 22%. But BoI finds the target achievable, as so far it has managed to grow at a rate above the industry-average – 26.5% YoY in deposits and 27.5% YoY in advances. 2009-10 would be a tougher year, but BoI plans to tackle it with creative initiatives like expansion in high-margin overseas markets – Kenya, for one example, a nationwide co-promotion with Tata Motors for commercial vehicles, and of course, the latest in technology implementation. Recently, tech major Hewlett-Packard completed Core Banking Solution (CBS) implementation in 100% of BoI branches; its greatness being that not only were there 3023 branches to cover, but the remotest of them were powered by Solar UPSs and VSATs. BoI’s free credit counselling service ‘Abhay’ deserves special mention for its grassroots approach. Debt-ridden customers – of home loans, car loans, credit cards, or personal loans - of all banks are welcome here, and BoI’s officers would not only counsel them, but negotiate with individual banks for restructuring their debt by way of increasing repayment term or lowering interest rates.

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