BoI turns to LIC, New India for capital

The Mumbai-based lender had made request to government to infuse Rs 1,500 cr as capital and expects to get Rs 800 cr

After failing to make it in the list of banks that will receive capital from the government in 2014-15, Bank of India (BoI) has turned to Life Insurance Corporation(LIC) and National Insurance Company for capital infusion of Rs 642 crore.

However, the bank still hopes to get funds from the government before the financial year ends and has again requested. Government stake in the bank is close to 67 per cent.

V R Iyer, chairperson and managing director, BoI said while the government has judged efficiency norms — return on assets and return on equity — to decide who will get equity, it (government) has to factor in the fact that BoI, State Bank of India and Bank of Baroda are active in international business where margins are thin.

“So parameters to judge their efficiency should be different. Plus, transition time should be given to them for improving performance on these parameters,” she said.

The Mumbai-based lender had made request to government to infuse Rs 1,500 crore as capital and expects to get Rs 800 crore, Iyer added.
    
The bank has proposed to issue equity shares on preferential basis to Life Insurance of Corporation of India (LIC) for Rs 547 crore and New India Assurance for Rs 97 crore to support business growth. It has convened a shareholders’ meeting on March 7 to get a nod to issue LIC and NIA shares on preferential basis.

The bank is growing at a rapid pace at an average growth rate of around 20 per cent over the last many years.  As on end December, its capital adequacy ratio was 10.68 per cent.

Central Bank of India, another Mumbai-based public sector bank, raised capital worth Rs 626 crore in January 2015 by issuing equity shares to LIC on preferential basis.

Last week, the government announced capital allocation of Rs 6,990 crore to only nine public sector banks which have shown better efficiency in recent years.