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Tamil Nadu banks set to get 1,000 cr after RBI cut


CHENNAI: Banks in Tamil Nadu are set to get over Rs 1,000 crore by way of funds as a result of key rate cuts by the Reserve Bank of India. On Tuesday, the central bank cut repo rate by 25 basis points to 7.75% and also reduced the CRR (cash reserve ratio), the share of deposits that banks must keep with the RBI, by 25 basis points to 4%.

The cuts will infuse an additional Rs 18,000 crore into the banking system. Of this, Tamil Nadu's share is expected to be slightly over Rs 1,000 crore. Cityheadquartered Indian Overseas Bank (IOB) is expected to get Rs 475 crore.

"This infusion will help us generate an income of Rs 48 crore over one year," M Narendra, chairman and managing director, IOB, said. Karur Vysya Bank is expected to get Rs 90 crore. "We have reduced our base rates by 0.25% to 10.75%. We anticipate a growth in advances as well as profits to some extent," K Venkataraman, chief executive officer, Karur Vysya Bank said. Some of the funds would also be utilized to increase provisions on restructured accounts. At the end of the second quarter of FY13, KVB's provision coverage ratio stood at 75.16%.

Kumbakonam-headquartered City Union Bank expects an infusion of Rs 40 to Rs 50 crore. "These funds would be utilized for our credit growth. The infusion is expected to add our profits to about Rs 4 crore," N Kamakodi, chief executive officer, City Union Bank said. "We are targeting an advance growth of 25% to 30% this year," he added. At the end of the second quarter, City Union Bank's advance portfolio grew by 26.76% to Rs 13,437 crore as against Rs 10,600 crore at the end of the second quarter of FY12.

While IOB will get Rs 475 crore, Karur Vysya Bank will get around Rs 90 crore. City Union Bank is set to get Rs 40 crore.