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Vijaya Bank plans to go for GAAP accounting

Fakir Chand in Bangalore

Buoyed by consistently healthy bottomline over the last three years and having returned to making net profits, the Bangalore-based Vijaya Bank is planning to go for Generally Accepted Accounting Principles of the US from the next financial year (2002-03) for international recognition and higher credit rating.

Disclosing this to rediff.com in Bangalore on Wednesday, Vijaya Bank chairman and managing director S Gopalakrishnan said the bank would be shortlisting one of the reputed international accounting firms like PricewaterhouseCoopers, KPMG or Arthur Anderson for GAAP accounting.

"Besides global recognition and better rating, GAAP accounting will qualify the bank to go for ADRs/GDRs at a later stage, which in turn will facilitate it to buyback the shares at a premium on the basis of their appreciation in the overseas stock exchanges after listing," Gopalakrishnan affirmed.

The public sector bank needs to reduce its huge paid-up capital, which is currently at Rs 3.58 billion even after the government diluted its 100 per cent stake to 72.16 per cent by offloading for a public issue to raise Rs 1 billion though the total subscription went up to Rs 1.81 billion.

"We are confident of generating more operating and net profits in the coming two years to raise sufficient funds for repaying the government so that its holding can be further reduced to 51 per cent.

Having made provisions for the huge exposure towards the voluntary retirement scheme that was implemented during the fiscal 2000-01, we hope to save substantially on the recurring salaries and wages over the next few years," Gopalakrishnan said.

The bank is also awaiting the approval of the Reserve Bank of India for entering the insurance business from this or the next fiscal. With the accounts for the fiscal year 2000-01 audited and completed, the bank is confident of getting the statutory clearance from the RBI to apply for an insurance license to the Insurance Regulatory Authority.

The bank is planning to tie up with one of the top three global insurance agencies for launching its insurance products in the country. It is learnt that the bank is in talks with Zurich Insurance, besides Punjab National Bank and Hero Honda for the proposed insurance venture.

"We intend to join the trio as the fourth player to tap the enormous potential in both life and non-life insurance sectors," the CMD stated.

Meanwhile, the bank has shown an all-time net profit of Rs 701 million for the preceding fiscal (2000-01) against Rs 521 million made in the corresponding period of fiscal 1999-2000, registering a growth rate of 33.9 per cent.

"The higher net profit was achieved after making provision of Rs 610 million towards expenditure on VRS. But for this extraordinary expenditure, the bank's net revenues would have more than doubled from the previous year," Gopalakrishnan claimed.

While total deposits went up by 13.7 per cent to Rs 126 billion from Rs 115 billion, the total advances remained at Rs 57.20 billion, and lending to the priority sector touched Rs 20.47 billion, up by 42.7 per cent over the previous year.

As a result, the bank's exposure to government securities and treasury bills was higher at Rs 58.70 billion. Even the exposure to VRS was higher than the net profit registered during the fiscal year under review.

The capital adequacy ratio has improved to 11.50 per cent from 10.61 per cent, while the net non-performing assets has declined to 6.23 per cent from 6.65 per cent, showing only a fractional recovery during the year.

Even the bank's gross NPAs stood at double digits at 10 per cent though down from 11.5 per cent.

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