IOB needs Rs 1,500-cr capital infusion to meet Basel-III norms

Public sector lender Indian Overseas Bank, whose Tier-I capital fell below eight per cent at the end of the first quarter, will need a Rs 1,500-crore capital infusion in the current financial year for its business growth and to meet the Basel-III requirement.

The bank’s Tier-I capital adequacy ratio (CAR) at the end of the June quarter was 7.92 per cent. The government has told banks to maintain the Tier-I CAR at eight per cent.

The government has asked public sector banks (PSBs) to send their capital requirements under the recently notified Basel-III norms of the Reserve Bank of India. Most PSBs have done so.

 

IOB is also weighing options to raise funds from the market. “The bank would look at qualified financial investors, preferential allotment of shares and a follow-on public offer to raise the capital,” said M Narendra, chairman and managing director.

“However, how much we raise through markets depends upon the market conditions. We might go for partial funding from the government but if the markets remain subdued, then we’ll have to ask the government for the complete infusion” said T S Srinivasan, chief financial officer.

The bank got Rs 1,440 crore from the government in 2011-12.

The bank is also planning to raise $500 million via medium term notes (MTNs). It had raised the same amount from MTNs in 2011-12. “We’ll deploy the funds raised from MTNs for funding Indian corporates who have overseas interests and MNCs,” added Narendra.

The MTN issue will be completed this month, Narendra said.

Recently, the country’s largest lender, State Bank of India, raised $ 1.25 billion through MTNs at 4.125 per cent for five years. Canara Bank had raised around Rs 2,000 crore through a QIP issue last year.