Govt to increase stake in Indian Bank marginally by infusing Rs 280 crore

The government has decided to infuse money in five banks based on their performance

The Centre has decided to infuse Rs 280 crore in Indian Bank by way of preferential equity allotment.

TM Bhasin, chairman and managing director of Indian Bank, said the government had decided to infuse capital in five public banks, including Indian Bank.

“The decision (government’s) was based on our efficiency,” said Bhasin,

The government had looked at return-on-assets and return-on-equity for the last three years, he added.

According to the bank, the average return-on-equity for the last three years for them had been at 15.08 per cent, whereas the return-on-assets at one per cent. Indian Bank claims it to be the best among the PSU banks.

Post the fund infusion, the Union government’s stake in the bank would increase to 81.80 per cent from 81.50 per cent, said Bhasin.

Indian Bank reported a five per cent rise in net profit at Rs 277.52 crore during the quarter ended December 31, 2014, when compared with Rs 264.50 crore for the same period a year ago.

At a time when most banks have been struggling with mounting bad loans, state-run Indian Bank has stemmed the rot by acting strongly on loan recoveries and through conservative lending.

While the bank has not been able to contain the rise in non performing assets (NPAs) in the concluded December quarter, the pace of fresh bad loan additions had not accelerated sharply.

This, along with its efforts to recover loans had restored some of the lost confidence on the stock. Shares of Indian Bank gained five per cent post the announcement of third quarter results.

The lender had added Rs 869 crore of fresh NPAs during the quarter. Of these, loans worth Rs 150 crore have already been upgraded, senior executives of the bank said.

The state-run bank has recovered Rs 175 crore between October and December.

Bhasin is confident the lender would be able to improve its credit quality in the coming quarters. “No one really wants to keep their accounts non-performing. In the next two or three quarters, things should take a positive turn on the asset quality front,” he said.