Indian overseas bank to get fresh capital from govt for this reason

Indian Overseas Bank (IOB) on Friday said it will get a fresh capital infusion of Rs 4,360 crore from the government in the current financial year for meeting regulatory requirement. In August, the finance ministry had announced a capital infusion of Rs 3,800 crore in the state-owned lender. This has now been increased by Rs 560 crore.

“The Bank has received vide letter dated December 25, 2019 for release of Rs 4,360 crore towards contribution of the central government in the preferential allotment of equity shares (Special Securities/Bonds) of the Bank during 2019-20 as Government’s investment,” IOB said in a BSE filing.
Besides, the government has approved infusion of Rs 2,142 crore in UCO Bank in line with what was announced in August this year.

Both the lenders are under the Prompt Corrective Action (PCA) framework of the Reserve Bank.
IOB has reported widening of net loss to Rs 2,253.64 crore for the quarter ended September 30, 2019.
The bank had registered a loss of Rs 487.26 crore in the year-ago period. In the June quarter of the current financial year, it had posted a loss of Rs 342 crore.

IOB’s gross non-performing assets stood at 20 per cent (Rs 28,673.95 crore) of gross advances during the September quarter, compared with 24.73 per cent (Rs 37,109.96 crore) in year-ago same period.
Net NPAs during the quarter stood at 9.84 per cent as against 14.34 per cent in the year-ago period.
The Net NPA level is higher than the RBI’s comfortable level of 6 per cent.

The PCA framework kicks in when banks breach any of the three key regulatory trigger points namely capital to risk weighted assets ratio, net non-performing assets (NPA) and return on assets (RoA).