The government's plan to infuse Rs 46.94 billion into Indian Overseas Bank (IOB) would help the bank to comply with the regulatory requirements and provide better headroom to improve its credit on niche areas, said R Subramaniakumar, chief executive officer of IOB.
Speaking to Business Standard, he said: "We have taken this capital into consideration while working out of plan of action for turnaround in FY19. It has reaffirmed our plan and thanks to the government for the timely and very positive and forward looking release of the capital."
"This is not only going to help the bank in meeting its regulatory compliance but also give a fair amount of headroom enabling it to improve credit on niche areas. The niche areas of the bank is retail, MSME and agriculture," he said.
"We will positively respond to the faith by the government by increasing our exposure to these areas, and take forward Government of India's theme of deepening the financial inclusion," Subramaniakumar added.
The first tranche of the capital is always in line with what has been discussed and the government has taken into consideration the regulatory compliance and fair headroom for growth," he said.
The bank is one of those for whom the government has put strict criteria before giving capital.
One of those is cutting losses and shedding non-core assets. The Reserve Bank of India (RBI) has also imposed prompt corrective action plan on the lender, greatly limiting its lending exercise to the high risk accounts.
The bank's gross Non Performing Assets were at Rs 347.08 billion, which as a percentage to the total advances was 22.73 per cent during the quarter ended September, 2017, as compared to Rs 347.24 billion (21.73 per cent) during the same period of previous year. The net NPA declined to Rs 189.49 billion (13.86 per cent) from Rs 207.65 billion (14.30 per cent) during the seame period of previous year.
It has recently decided to utilise the share premium money to set off losses, thus helping the bank to restart delivering dividend to the shareholders. The loss-making bank paid the dividend last time almost four years ago.