Boi Banking On Staff, Small Investors

The Bank of India (BoI) is relaxing prudential lending norms to its staff members in order to increase the potential investor base for its forthcoming Rs 675-crore public issue. Also the management is encouraging the staff to put several applications (not multiple applications) to get maximum allotments.

BoI has reserved 10 per cent of the public issue, Rs 67.5 crore, for its regular and permanent staff members numbering 53,627. The staff has been assured of allotments up to 300 shares per application and they may fill up to 10 applications so as to get maximum allotments, a senior bank functionary said.

 

However, there is no persuasion or pressure from the management for the staffs compulsory issue subscription, the official stressed. The bank is luring the staff into subscribing to the issue by giving a loan of Rs 50,000 per member. It is extending the loan at its prime lending rate of 15.5 per cent irrespective of the credit appraisal and repayment consideration.

According to BoI staff loans and advance guidelines; the staffs repayment capacity reaches a saturation point when monthly deductions exceed 65 per cent of the monthly take home salary and no further loans are approved. However, for the banks public issue the management has decided to take a soft stand on the guidelines.

Guidelines are being relaxed as the loan for the public issue is being given for asset building and not for consumption, a senior bank official told Business Standard.

As per the terms, the loan will be repayable over a period of nine years in 108 instalments or from the members super-annuation proceeds.

In the event of the staff opting for repayment through deductions, the first such monthly deduction will commence after one year from the date of the loan disbursement.