IOB to cash in on realty

Total income Net profit CAR (%) Mar '071,93629013.27 Jun '071,90826813.31 Sep '072,10532013.31 Dec'072,295308

-

Mar '082,46830611.96 Source: BSE  According to the bank's estimates, the prices of its property has appreciated nearly 200 per cent over the last couple of years.  IOB has sought the approval of the finance ministry for implementing the idea, according to a top bank executive. If approved by the ministry, the government-owned bank's profit will soar by Rs 6 billion and the amount will be ploughed back to its Tier-I capital.  Banks are allowed to use 40 per cent of the rise in assets valuation to accrue to their Tier-II capital. In the current case, however, the bank will show the transaction as a sale and not revaluation. Hence the entire value of the property is accruable to its Tier-I capital.  The move followed a substantial depletion in the bank's capital adequacy ratio in the previous financial year as it had to comply with Basel-II norms. The capital adequacy ratio of the bank was 11.13 per cent as on March 31 compared with 13.27 per cent in the same period a year ago. The Tier-I capital stood at 7.31 per cent.  Since the government owns 61.23 per cent in the bank, it can dilute its stake to 51 per cent to raise equity capital. However, the bank is not considering a stake dilution at this point of time, the executive said.  Indian laws allow the state-owned banks to dilute up to 49 per cent governmental stake to retail and institutional investors.