IOB gets Rs 4360 cr capital infusion from GoI

State-run Indian Overseas Bank (IOB) has received capital infusion of Rs 4,360 crore from the government.

Share of the public sector bank ended 0.54% lower at Rs 11.11 on Friday.

In an exchange filing made after market hours on Friday (3 January), IOB said it has received the amount as contribution of the government in preferential allotment of equity shares during the financial year 2019-20 as government's investment.

Fresh capital infusion in the PSU banks by the government is a part of the announcement made by Finance Minister Nirmala Sitharaman, in her maiden Budget in July 2019.

Shares of public sector banks have rallied in the past ten sessions after the Reserve Bank of India on 19 December 2019 decided to conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for Rs 10,000 crore each on 23 December 2019. Since then, the country's central bank has undertaken two more tranches of the special OMOs, taking the total count to three.

This simultaneously buying long-end bonds and selling short-end bonds leads to a flattening of the yield curve. The falling yields and rising bond prices are credit positive for state-run banks as mark-to-market (MTM) profit from the government bonds' increases in their investment portfolios.

Since 19 December 2019, shares of IOB have rallied 10.99% and the Nifty PSU Bank index has gained 0.42% while the Nifty Bank index has lost 0.53%.

IOB reported a net loss of Rs 2,253.64 crore in Q2 September 2019 compared with a net loss of Rs 487.26 crore in Q2 September 2018. Total income fell 6.1% to Rs 5,024 crore in Q2 September 2019 as against Q2 September 2018.

The Net Interest Income (NII) declined 6.52% to Rs 1,204 crore in Q2 September 2019 as against Rs 1,288 crore in Q1 June 2019. NII fell 0.33% from Rs 1,208 crore in Q2 September 2018.

Government of India holds 92.52% stake in IOB (as on 30 September 2019).

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