State-owned Punjab & Sind Bank will approach the capital markets with a Rs 100-crore (Rs 1 billion) initial public offering this year, after it has cleared its issue of NPA divergence with the Reserve Bank of India.

"PNB was likely to achieve a capital adequacy ratio of 9.6 per cent this year against 5.27 per cent, and our net NPA (non performing assets) will be less than 10 per cent, putting us in a comfortable position to approach the capital markets," N S Gujral, the bank's chairman and managing director, said at a press conference in Kolkata on Wednesday.

"We have requested the Reserve Bank to audit our accounts for 2002-03 and we expect the process to be complete in another few months. Then we will initiate the process of floating an IPO," he explained.

PSB had planned an IPO in 2001 which it postponed after RBI pointed out the divergence. An audit conducted by the apex bank in August 2002 concluded that there were divergences in the bank's accounting of NPAs.

This brought down the bank's CAR to 5.27 per cent and net NPA increased to 11.6 per cent - well beyond the stipulated parameters of the central bank, triggering an alert for PSB. Since then the bank had initiated the process of correcting its books and has provisioned for the Rs 221 crore (Rs 2.21 billion) shortfall, of which some odd Rs 34 crore was settled latter.

"PNB has also brought down its cost of deposit by retiring high-cost deposits to the extent of Rs 1,000 crore (Rs 10 billion) in 2001-02, followed by another Rs 300 crore (Rs 3 billion) in 2002-03. Another chunk of Rs 400 crore (Rs 4 billion) is still lying with the bank, this we expect to retire this year," Gujral said.

"Our cost of deposit at present is close to 6.01 per cent against 7.9 per cent in 2001," he added.

On the operating profit front, the bank expects to clock a Rs 260 crore (Rs 2.6 billion) figure for 2002-03 against Rs 163 crore (Rs 1.63 billion) in the previous fiscal.

Nevertheless, for the current year PSB has targeted a 18 per cent growth in deposits against a Rs 13,000 crore (Rs 130 billion) achieved in 2002-03.