Government infuses Rs 1,100 capital into Indian Overseas Bank

Source: Business Standard, Mar 23, 2017

Chennai: Chennai-based Indian Overseas Bank (IOB), going through a tough time due to increase in non-performing assets, is to get Rs 1,100 crore from the Government of India, the major shareholder.

This comes after the bank achieved the parameters set by the government as part of a turnaround-linked capital infusion plan; the ministry of finance has sent the communication, said IOB sources. The bank was expecting Rs 1,550 crore from the Centre but the amount got reduced after some of the capital was redistributed to IDBI.

The government has acknowledged that the bank is taking the right steps, having put in place the right strategies to turn around the institution. That is why they have allocated the additional capital, said an official.

IOB’s net loss in 2015-2016 was Rs 2,897 crore. The net loss during the nine months ended December 31 was Rs 2,770 crore.

The government had set five parameters for further capital infusion. These include cash recovery — four times more than the target given. The risk weighted assets target set was a maximum of 110.42; IOB achieved 108.25. The gross profit to advances targets were also achieved.

The official added with the new Rs 1,100 capital, the bank could do an additional Rs 11,000 crore of business. The capital adequacy ratio  is currently above the mandated percentage; as the business expands, it will come down slightly; the infusion will help to achieve the mandate before end-March.

 

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