Oriental Bank of Commerce advanced today after reports that the bank will pay Rs 50 crore to the Union Government as a move to reduce its share capital.
By 12:50 IST, the scrip of the state-run bank rose by 11.18% to Rs 83.05 on the BSE. A volume of over 3.71 lakh shares was recorded on the counter. Currently, the scrip is close to its 52-week high of Rs 84.10.
On 26 April 2003, the board of directors of Oriental Bank of Commerce (OBC) approved the proposal in respect of return of capital amounting to Rs 50 crore out of Rs 128 crore held by the government in the total capital of the bank. This is subject to necessary approval from the Union Government & shareholders of the bank. Currently, the Union Government holds 66.5% stake in OBC.
Analysts said the OBC scrip rallied largely due to this development, which is expected to reduce the bank's financials. On the other hand, dealers said the rise in the scrip was also on rumours that the Credit Policy for 2003-04, to be announced by the Reserve Bank of India on Tuesday, may go for a cut in the repo rate and the bank rate by 25 to 50 basis points to 4.50-4.75% and 5-5.25% respectively. This is likely to boost bank stocks.
Delhi-based OBC has posted a 42% and 31% rise in bottom line to Rs 121.57 crore and Rs 337.46 crore for the third quarter and nine-month period ended 31 December 2002, respectively. This was despite higher provisioning, mainly due to improvement in interest spreads and lower operating expenses.
OBC continues to lay high emphasis on disbursement of credit to the retail sector under various customer friendly schemes. The housing loan portfolio of the bank has reached a hallmark level of Rs 1,620 crore, which works out to 11% of the total advances of the bank.
During the nine-month period ended 31 December 2002, OBC has been able to recover Rs 288 crore of non-performing assets as compared to Rs 166 crore during the corresponding previous year ended December 2001. Under the Securitisation Act, 2002, the bank has issued notices in 1,244 NPA cases, aggregating to a sum of Rs 146.45 crore. In 210 cases, the bank has taken over properties and a sum of Rs 11 crore in cash recoveries have been effected.
Despite releasing 740 employees (5.1%) through voluntary retirement scheme (VRS) in March 2001, the bank has redeployed/rationalised its staff strength to increase the customer outlet's network by 49 branches and 27 extension counters, taking the total number to 981 branches and 136 extension counters as on 31 December 2002. The implementation of core banking solution, networking of branches and ATMs of the bank is progressing at a fast pace and the bank has captured live 91% of its business through 932 computerised branches.
As on 31 December 2002, the public and institutions held nearly 16% stake each in the equity of OBC.