Oriental Bank plans life insurance foray

Saturday 24, June, 2006 Oriental Bank of Commerce (OBC) has proposed to foray into the life insurance sector, possibly by forming a joint venture company. The bank hopes to move ahead in this direction in the next 6-12 months.

OBC, which already distributes insurance products, is open to the idea of working out a joint venture with specialist outfits, including overseas partners, Mr K.N. Prithviraj, Chairman and Managing Director, said, adding that the insurance business would be in sync with the bank's plan to step into newer areas.

"While the board has not taken a view on the matter, the thought process is gaining ground within the bank. We will not be in a position to go ahead in this direction all by ourselves. Therefore, a partnership will be essential," he said.

The OBC board has lately met to consider what are seen as two important moves. First, the bank has decided to roll out a corporate branch in Mumbai, which will be required to report straight to its headquarters. Simultaneously, it has proposed to focus on mid-size clientele.

Two, it has planned to step up efforts to expand the existing customer base. The latter now stands at 8.8 million.

OBC, the CMD indicated, has room for raising Rs 500 crore (upper Tier II) this year. Incidentally, it had raised Rs 500 crore in April. Further, there are plans to set up a representative office in Dubai.

Mr Prithviraj was talking to newspersons after addressing a meeting organised by FICCI here on Friday.

The bank, which has recorded a business of Rs 89,000 crore, hopes to scale it up to about Rs 1 lakh crore by the end of the current fiscal. In terms of profitability, it now stands among the first few banks in the public sector.

GTB loan recovery

OBC, which stepped in when Global Trust Bank failed, was well on course in terms of recovery of its NPAs, Mr Prithviraj indicated, recalling that roughly two years have passed since GTB came into its fold.

"While the process of recovery is going on, we will have to take out Rs 240 crore or so to gradually wipe out the accumulated losses of GTB", he said while referring to the modalities of the exercise.

The GTB case, incidentally, is seen as a bailout, and not as a fusion between two strong banking entities. "I am of the view that healthy banks need to merge in order to become more efficient. Then the downside of weak banks being taken over will not be there", the CMD stated,

He added that GTB presented a fit case where governance standards had failed. "It was a mini Enron", he mentioned.

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