Andhra Bank plans to reduce capital base

The unabsorbed portion of the accumulated losses is to be set off against the capital of the bank which will effectively reduce its equity from the current level of Rs 645 crore to Rs 345 crore, according to Narayanan. The bank will seek the permission of the government for that purpose. Though he said that it was too early to arrive at the issue size, its pricing, etc, he added that the bank has satisfied three of the four criteria viz. capital adequacy ratio, NPA level and its net worth laid down by the government for granting autonomy. The fourth criterion which is three successive years of profitability would be satisfied when the bank makes a profit in 1997-98.

The turnaround of the bank, Narayanan said, was achieved after conservative accounting practices. The bank has provided for NPAs much higher than what was recommended by its auditors and has marked to the market 63 per cent of its investments as against the 50 per cent level stipulated by the Reserve Bank of India (RBI). Its NPA level of 4.10 per cent and capital adequacy ratio of 12.05 per cent rank second among the nationalised banks. He also said that the bank was gearing up to face competition especially after the recent WTO agreement on the financial sector which would pave way for spread of foreign banks.